Problem 13-9 Returns and Variances [LO1] Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Boom Bust .60 .40 Stock A .08 Stock B .16 Stock C .34 .18 .08 -.07 a. What is the expected return on an equally weighted portfolio of these three stocks? (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 a portfolio invested 18 percent each in A and B and 64 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.) Answer is complete but not entirely correct. a. Expected return b. Variance 14.13% 0.005703
Problem 13-9 Returns and Variances [LO1] Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Boom Bust .60 .40 Stock A .08 Stock B .16 Stock C .34 .18 .08 -.07 a. What is the expected return on an equally weighted portfolio of these three stocks? (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 a portfolio invested 18 percent each in A and B and 64 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.) Answer is complete but not entirely correct. a. Expected return b. Variance 14.13% 0.005703
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
Related questions
Question
![Problem 13-9 Returns and Variances [LO1]
Consider the following information:
Rate of Return if State Occurs
State of Economy
Probability of State
of Economy
Boom
Bust
.60
.40
Stock A
.08
Stock B
.16
Stock C
.34
.18
.08
-.07
a. What is the expected return on an equally weighted portfolio of these three stocks?
(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 a portfolio invested 18 percent each in A and B and 64 percent
in C? (Do not round intermediate calculations and round your answer to 6 decimal
places, e.g., .161616.)
Answer is complete but not entirely correct.
a. Expected return
b. Variance
14.13%
0.005703](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb039a950-b5dc-4d0d-811e-d1f06a861a06%2F380a639a-4e0f-4a3b-9e55-266171e1f6a8%2Fc2ylek_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 13-9 Returns and Variances [LO1]
Consider the following information:
Rate of Return if State Occurs
State of Economy
Probability of State
of Economy
Boom
Bust
.60
.40
Stock A
.08
Stock B
.16
Stock C
.34
.18
.08
-.07
a. What is the expected return on an equally weighted portfolio of these three stocks?
(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 a portfolio invested 18 percent each in A and B and 64 percent
in C? (Do not round intermediate calculations and round your answer to 6 decimal
places, e.g., .161616.)
Answer is complete but not entirely correct.
a. Expected return
b. Variance
14.13%
0.005703
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education