Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Stock C Boom 0.58 0.08 0.17 0.37 Bust 0.42 0.11 0.04 -0.06 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Expected return % b. What is the variance of a portfolio invested 20% each in A and B and 60% in C? (Do not round intermediate calculations. Round the final answer to 6 decimal places.) Variance =

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 1P
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Consider the following information:
State of
Economy Probability of State of Economy Rate of Return if State Occurs
Stock A Stock B Stock C
Boom 0.58 0.08 0.17 0.37
Bust 0.42 0.11 0.04 -0.06
a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Expected return %
b. What is the variance of a portfolio invested 20% each in A and B and 60% in C? (Do not round intermediate calculations. Round the final answer to 6 decimal places.)
Variance =
Transcribed Image Text:Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Stock C Boom 0.58 0.08 0.17 0.37 Bust 0.42 0.11 0.04 -0.06 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Expected return % b. What is the variance of a portfolio invested 20% each in A and B and 60% in C? (Do not round intermediate calculations. Round the final answer to 6 decimal places.) Variance =
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