State of Economy Probability of State of Economy Boom Bust .68 .32 Stock A .11 .25 Stock B Stock C .05 .36 .31 -.16 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, b. What is the variance of a portfolio invested 23 percent each in A and B and 54 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.
State of Economy Probability of State of Economy Boom Bust .68 .32 Stock A .11 .25 Stock B Stock C .05 .36 .31 -.16 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, b. What is the variance of a portfolio invested 23 percent each in A and B and 54 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.
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:Consider the following information:
Rate of Return if State Occurs
State of Economy Probability of State of Economy
Boom
Bust
.68
.32
Stock A
.11
.25
Stock B
.05
Stock C
.36
.31
-.16
a. What is the expected return on an equally weighted portfolio of these three stocks?
Note: 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 23 percent each in A and B and 54 percent in C?
Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.
Answer is complete but not entirely correct.
a. Expected return
b. Variance of portfolio
22.72%
0.01040 x
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