State of Economy Boom Bust Probability of State of Economy .58 .42 Rate of Return if State Occurs Stock A Stock B Stock C .40 -.05 .14 16 .22 .06 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 22 percent each in A and B and 56 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.)
State of Economy Boom Bust Probability of State of Economy .58 .42 Rate of Return if State Occurs Stock A Stock B Stock C .40 -.05 .14 16 .22 .06 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 22 percent each in A and B and 56 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.)
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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Transcribed Image Text:State of
Economy
Boom
Bust
Probability of
State of
Economy
.58
.42
Rate of Return if State Occurs
Stock A Stock B Stock C
.22
.40
.06
-.05
0.013340 X
.14
.16
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 22 percent each in A and B and 56
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
12.87%
b. Variance
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