Consider the following information: State of Economy Probability of State of Economy 72 Boom Bust .28 a. Expected return b. Variance of portfolio Rate of Return if State Occurs Stock A Stock B Stock C .30 --10 % 10 -19 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the variance of a portfolio invested 27 percent each in A and B and 46 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. .04 25
Consider the following information: State of Economy Probability of State of Economy 72 Boom Bust .28 a. Expected return b. Variance of portfolio Rate of Return if State Occurs Stock A Stock B Stock C .30 --10 % 10 -19 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the variance of a portfolio invested 27 percent each in A and B and 46 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. .04 25
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![Consider the following information:
State of Economy Probability of State of Economy
Boom
Bust
72
.28
a. Expected return
b. Variance of portfolio
Rate of Return if State Occursa
Stock A Stock B
Stock C
.30
--10
%
10
-19
a. What is the expected return on an equally weighted portfolio of these three stocks?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
b. What is the variance of a portfolio invested 27 percent each in A and B and 46 percent in C?
Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.
.04
.25](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3f149725-d374-4f17-bc7b-5d8403413548%2F1ae6ec93-8f18-43e0-8247-428265217a4f%2Fpw0evfw_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider the following information:
State of Economy Probability of State of Economy
Boom
Bust
72
.28
a. Expected return
b. Variance of portfolio
Rate of Return if State Occursa
Stock A Stock B
Stock C
.30
--10
%
10
-19
a. What is the expected return on an equally weighted portfolio of these three stocks?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
b. What is the variance of a portfolio invested 27 percent each in A and B and 46 percent in C?
Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.
.04
.25
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