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State of Economy Boom Normal Bust Probability of State Stock A Rate of Stock B Rate of Stock C Rate of Economy of Return Return Return .25 .04 .33 .60 .09 .13 .15 .15 -.14 .55 .19 -.28 a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return? The variance? The standard deviation? Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., .16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16. b. If the expected T-bill rate is 3.4 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

State of Economy Boom Normal Bust Probability of State Stock A Rate of Stock B Rate of Stock C Rate of Economy of Return Return Return .25 .04 .33 .60 .09 .13 .15 .15 -.14 .55 .19 -.28 a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return? The variance? The standard deviation? Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., .16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16. b. If the expected T-bill rate is 3.4 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

Essentials Of Investments
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
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Consider the following information on a portfolio of three stocks: State of Economy Boom Normal Bust Probability of State Stock A Rate of Stock B Rate of Stock C Rate of Economy of Return Return Return .04 .33 .09 .13 .15 -.14 .25 .60 .15 a. Expected return Variance Standard deviation b. Expected risk premium a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return? The variance? The standard deviation? Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., .16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16. b. If the expected T-bill rate is 3.4 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. .55 .19 -.28 % % %
Transcribed Image Text:Consider the following information on a portfolio of three stocks: State of Economy Boom Normal Bust Probability of State Stock A Rate of Stock B Rate of Stock C Rate of Economy of Return Return Return .04 .33 .09 .13 .15 -.14 .25 .60 .15 a. Expected return Variance Standard deviation b. Expected risk premium a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return? The variance? The standard deviation? Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., .16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16. b. If the expected T-bill rate is 3.4 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. .55 .19 -.28 % % %
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