Consider the following information: State of Economy Probability of State of Economy Boom Bust .67 .33 .10 .24 .04 .30 Rate of Return if State Occurs Stock A Stock B Stock C .35 -.15 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 22 percent each in A and B and 56 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. Answer is complete but not entirely correct. a. Expected return b. Variance of portfolio 11.90% 0.01247 X
Consider the following information: State of Economy Probability of State of Economy Boom Bust .67 .33 .10 .24 .04 .30 Rate of Return if State Occurs Stock A Stock B Stock C .35 -.15 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 22 percent each in A and B and 56 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. Answer is complete but not entirely correct. a. Expected return b. Variance of portfolio 11.90% 0.01247 X
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
Transcribed Image Text:Consider the following information:
State of Economy Probability of State of Economy
Boom
Bust
Rate of Return if State Occurs
Stock A Stock B Stock C
.67
.33
.10
.24
.04
.35
.30
-.15
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 22 percent each in A and B and 56 percent in C?
Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.
Answer is complete but not entirely correct.
a. Expected return
b. Variance of portfolio
11.90%
0.01247 X
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