Read the information for 3 stocks X, Y and Z below. Rate of return when state occurs (For Stock X, Y, and Z) State of Economy Probability of State Stock X Stock Y Stock Z Boom 0.3 0.4 0.45 0.6 Normal 0.5 0.2 0.15 0.08 Recession 0.2 0 -0.3 -0.4 If your portfolio includes 35 percent of X, 40 percent of Y and 25 percent of Z, answer the following questions: (a) Calculate the portfolio expected return. (b) Calculate the variance and the standard deviation of the portfolio (c) If the expected T-bill rate is 3.80 percent, calculate the expected risk premium on the portfolio.
Read the information for 3 stocks X, Y and Z below. Rate of return when state occurs (For Stock X, Y, and Z) State of Economy Probability of State Stock X Stock Y Stock Z Boom 0.3 0.4 0.45 0.6 Normal 0.5 0.2 0.15 0.08 Recession 0.2 0 -0.3 -0.4 If your portfolio includes 35 percent of X, 40 percent of Y and 25 percent of Z, answer the following questions: (a) Calculate the portfolio expected return. (b) Calculate the variance and the standard deviation of the portfolio (c) If the expected T-bill rate is 3.80 percent, calculate the expected risk premium on the portfolio.
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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Read the information for 3 stocks X, Y and Z below.
| State of Economy | Probability of State | Stock X | Stock Y | Stock Z |
| Boom | 0.3 | 0.4 | 0.45 | 0.6 |
| Normal | 0.5 | 0.2 | 0.15 | 0.08 |
| Recession | 0.2 | 0 | -0.3 | -0.4 |
If your portfolio includes 35 percent of X, 40 percent of Y and 25 percent of Z, answer
the following questions:
(a) Calculate the portfolio expected return.
(b) Calculate the variance and the standard deviation of the portfolio
(c) If the expected T-bill rate is 3.80 percent, calculate the expected risk premium
on the portfolio.
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