Consider the following information: State of Probability of Economy State of Economy Rate of Return if State Occurs Stock A Stock B Stock C Boom .15 .350 .450 .330 Good .45 .120 .100 .170 Poor Bust .35 .05 .010 -.110 .020 -.050 -.250 -.090 a. Your portfolio is invested 30 percent each in A and C and 40 percent in B. What is the expected return of the portfolio? 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 this portfolio? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. c. What is the standard deviation of this portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16 a. Expected return b. Variance c. Standard deviation % %

Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 1CMA
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Consider the following information:
State of
Probability of
Economy State of Economy
Rate of Return if State Occurs
Stock A
Stock B
Stock C
Boom
.15
.350
.450
.330
Good
.45
.120
.100
.170
Poor
Bust
.35
.05
.010
-.110
.020
-.050
-.250
-.090
a. Your portfolio is invested 30 percent each in A and C and 40 percent in B. What is the expected return of the portfolio?
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 this portfolio?
Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.
c. What is the standard deviation of this portfolio?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16
a. Expected return
b. Variance
c. Standard deviation
%
%
Transcribed Image Text:Consider the following information: State of Probability of Economy State of Economy Rate of Return if State Occurs Stock A Stock B Stock C Boom .15 .350 .450 .330 Good .45 .120 .100 .170 Poor Bust .35 .05 .010 -.110 .020 -.050 -.250 -.090 a. Your portfolio is invested 30 percent each in A and C and 40 percent in B. What is the expected return of the portfolio? 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 this portfolio? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. c. What is the standard deviation of this portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16 a. Expected return b. Variance c. Standard deviation % %
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