Problem 13-23 Portfolio Returns and Deviations [LO2] Consider the following information about three stocks: Rate of Return if State Occurs Probability of State State of Economy Boom Normal of Economy .26 Stock A .32 Stock B .44 Stock C .56 .50 .13 .11 .09 Bust .24 .04 -.25 -.45 a-1. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio expected return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. What is the variance? (Do not round intermediate calculations and round answer to 5 decimal places, e.g., .16161.) b. your a-3. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) If the expected T-bill rate is 3.30 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. If the expected inflation rate is 2.90 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-2. What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a-1. Portfolio expected return a-2. Variance a-3. Standard deviation % %
Problem 13-23 Portfolio Returns and Deviations [LO2] Consider the following information about three stocks: Rate of Return if State Occurs Probability of State State of Economy Boom Normal of Economy .26 Stock A .32 Stock B .44 Stock C .56 .50 .13 .11 .09 Bust .24 .04 -.25 -.45 a-1. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio expected return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. What is the variance? (Do not round intermediate calculations and round answer to 5 decimal places, e.g., .16161.) b. your a-3. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) If the expected T-bill rate is 3.30 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. If the expected inflation rate is 2.90 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-2. What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a-1. Portfolio expected return a-2. Variance a-3. Standard deviation % %
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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![Problem 13-23 Portfolio Returns and Deviations [LO2]
Consider the following information about three stocks:
Rate of Return if State Occurs
Probability of State
State of Economy
Boom
Normal
of Economy
.26
Stock A
.32
Stock B
.44
Stock C
.56
.50
.13
.11
.09
Bust
.24
.04
-.25
-.45
a-1. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is
the portfolio expected return? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
a-2. What is the variance? (Do not round intermediate calculations and round
answer to 5 decimal places, e.g., .16161.)
b.
your
a-3. What is the standard deviation? (Do not round intermediate calculations and
enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
If the expected T-bill rate is 3.30 percent, what is the expected risk premium on the
portfolio? (Do not round intermediate calculations and enter your answer as a
percent rounded to 2 decimal places, e.g., 32.16.)
c-1. If the expected inflation rate is 2.90 percent, what are the approximate and exact
expected real returns on the portfolio? (Do not round intermediate calculations
and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
c-2. What are the approximate and exact expected real risk premiums on the portfolio?
(Do not round intermediate calculations and enter your answers as a percent
rounded to 2 decimal places, e.g., 32.16.)
a-1. Portfolio expected return
a-2. Variance
a-3. Standard deviation
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7bedf80e-409b-461c-81a0-1514ea8234fa%2F5511f571-6daa-44a5-b38f-70800c3a9d64%2Fm4dz5sp_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 13-23 Portfolio Returns and Deviations [LO2]
Consider the following information about three stocks:
Rate of Return if State Occurs
Probability of State
State of Economy
Boom
Normal
of Economy
.26
Stock A
.32
Stock B
.44
Stock C
.56
.50
.13
.11
.09
Bust
.24
.04
-.25
-.45
a-1. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is
the portfolio expected return? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
a-2. What is the variance? (Do not round intermediate calculations and round
answer to 5 decimal places, e.g., .16161.)
b.
your
a-3. What is the standard deviation? (Do not round intermediate calculations and
enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
If the expected T-bill rate is 3.30 percent, what is the expected risk premium on the
portfolio? (Do not round intermediate calculations and enter your answer as a
percent rounded to 2 decimal places, e.g., 32.16.)
c-1. If the expected inflation rate is 2.90 percent, what are the approximate and exact
expected real returns on the portfolio? (Do not round intermediate calculations
and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
c-2. What are the approximate and exact expected real risk premiums on the portfolio?
(Do not round intermediate calculations and enter your answers as a percent
rounded to 2 decimal places, e.g., 32.16.)
a-1. Portfolio expected return
a-2. Variance
a-3. Standard deviation
%
%
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