Expected return and standard deviation. Use the following information to answer the questions.       State of   Economy Probability of State Return on Asset R in State Return on Asset S in State Return on Asset T in State     Boom   0.25   0.020   0.270   0.490     Growth   0.35   0.020   0.110   0.280     Stagnant   0.22   0.020   0.140   0.020     Recession   0.18   0.020   −0.030   −0.150     a.  What is the expected return of each​ asset? b.  What are the variance and the standard deviation of each​ asset? c.  What is the expected return of a portfolio with equal investment in all three​ assets? d.  What is the​ portfolio's variance and standard deviation using the same asset weights in part ​(c​)?   ​Hint: Make sure to round all intermediate calculations to at least seven​ (7) decimal places.  a. What is the expected return of asset​ R?       ​(Round to four decimal​ places.) What is the expected return of asset​ S?        ​(Round to four decimal​ places.) What is the expected return of asset​ T?       ​ (Round to four decimal​ places.) b. What is the variance of asset​ R?       ​(Round to four decimal​ places.) What is the variance of asset​ S?        ​(Round to four decimal​ places.) What is the variance of asset​ T?       ​(Round to four decimal​ places.) What is the standard deviation of asset​ R?       ​(Round to four decimal​ places.) What is the standard deviation of asset​ S?       ​(Round to four decimal​ places.) What is the standard deviation of asset​ T?       ​(Round to four decimal​ places.) c.  What is the expected return of a portfolio with equal investment in all three​ assets?      ​(Round to four decimal​ places.) d. What is the​ portfolio's variance using the same asset weights from part ​(c​)?     ​(Round to four decimal​ places.) What is the​ portfolio's standard using the same asset weights from part ​(c​)?     ​(Round to four decimal​ places.)

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
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Expected return and standard
deviation.
Use the following information to answer the questions.
 
 
  State of
  Economy
Probability
of State
Return on
Asset R in
State
Return on
Asset S in
State
Return on
Asset T in
State
 
  Boom
 
0.25
 
0.020
 
0.270
 
0.490
 
  Growth
 
0.35
 
0.020
 
0.110
 
0.280
 
  Stagnant
 
0.22
 
0.020
 
0.140
 
0.020
 
  Recession
 
0.18
 
0.020
 
−0.030
 
−0.150
 
 
a.  What is the expected return of each​ asset?
b.  What are the variance and the standard deviation of each​ asset?
c.  What is the expected return of a portfolio with equal investment in all three​ assets?
d.  What is the​ portfolio's variance and standard deviation using the same asset weights in part
​(c​)?
 
​Hint: Make sure to round all intermediate calculations to at least seven​ (7) decimal places. 
a. What is the expected return of asset​ R?  
 
 
​(Round to four decimal​ places.)
What is the expected return of asset​ S?  
 
  
​(Round to four decimal​ places.)
What is the expected return of asset​ T?  
 
 
​ (Round to four decimal​ places.)
b. What is the variance of asset​ R?  
 
 
​(Round to four decimal​ places.)
What is the variance of asset​ S?  
 
  
​(Round to four decimal​ places.)
What is the variance of asset​ T?  
 
​(Round to four decimal​ places.)
What is the standard deviation of asset​ R?  
 
 
​(Round to four decimal​ places.)
What is the standard deviation of asset​ S?  
 
 
​(Round to four decimal​ places.)
What is the standard deviation of asset​ T?  
 
 
​(Round to four decimal​ places.)
c.  What is the expected return of a portfolio with equal investment in all three​ assets?
 
  
​(Round to four decimal​ places.)
d. What is the​ portfolio's variance using the same asset weights from part
​(c​)?
 
 
​(Round to four decimal​ places.)
What is the​ portfolio's standard using the same asset weights from part
​(c​)?
 
​(Round to four decimal​ places.)
 
 
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