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Consider the following information: Stock A Stock B Stock C State of Economy Boom Bust .14 .22 .40 .16 .06 -.05 a. What is the expected return on an equally weighted portfolio of these three stocks? 17.06 % Rate of Return if State Occurs Probability of State of Economy .58 .42 b. What is the variance of a portfolio invested 22 percent each in A and B and 56 percent in C? .1456 (write as a decimal rounded to 4 decimal places)

Consider the following information: Stock A Stock B Stock C State of Economy Boom Bust .14 .22 .40 .16 .06 -.05 a. What is the expected return on an equally weighted portfolio of these three stocks? 17.06 % Rate of Return if State Occurs Probability of State of Economy .58 .42 b. What is the variance of a portfolio invested 22 percent each in A and B and 56 percent in C? .1456 (write as a decimal rounded to 4 decimal places)

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter3: Risk And Return: Part Ii
Section: Chapter Questions
Problem 3P: Two-Asset Portfolio Stock A has an expected return of 12% and a standard deviation of 40%. Stock B...
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Consider the following information: Rate of Return if State Occurs State of Economy Stock A Boom .14 Bust .16 a. What is the expected return on an equally weighted portfolio of these three stocks? 17.06 % Probability of State of Economy .58 .42 Stock B .22 .06 b. What is the variance of a portfolio invested 22 percent each in A and B and 56 percent in C? .1456 (write as a decimal rounded to 4 decimal places) Stock C .40 -.05
Transcribed Image Text:Consider the following information: Rate of Return if State Occurs State of Economy Stock A Boom .14 Bust .16 a. What is the expected return on an equally weighted portfolio of these three stocks? 17.06 % Probability of State of Economy .58 .42 Stock B .22 .06 b. What is the variance of a portfolio invested 22 percent each in A and B and 56 percent in C? .1456 (write as a decimal rounded to 4 decimal places) Stock C .40 -.05
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