Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Stock C .12 .06 .37 .26 .32 Boom Bust .69 .31 -.17 a. What is the expected return on a equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 de b. What is the variance of a portfolio invested 24 percent each in A and B and 52 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16 a. Expected return 16.89%
Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Stock C .12 .06 .37 .26 .32 Boom Bust .69 .31 -.17 a. What is the expected return on a equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 de b. What is the variance of a portfolio invested 24 percent each in A and B and 52 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16 a. Expected return 16.89%
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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Transcribed Image Text:Consider the following information:
Boom
Bust
State of Economy Probability of State of Economy
Rate of Return if State Occurs
.69
.31
Stock A
.12
.26
Stock B
Stock C
.06
.37
.32
-.17
a. What is the expected return on a equally weighted portfolio of these three stocks?
b. What is the variance of a portfolio invested 24 percent each in A and B and 52 percent in C?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32
Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.
a. Expected return
b. Variance of portfolio
16.89%
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