Consider the following information on a portfolio of three stocks:State of EconomyProbability of State of EconomyStock A Rate of ReturnStock B Rate of ReturnStock C Rate of ReturnBoom.25.04.33.55Normal.60.09.13.19Bust.15.15−.14−.28If 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.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.

Answer a.Weight of Stock A = 0.40Weight of Stock B = 0.40Weight of Stock C = 0.20Boom:Expected…

Answered: If your portfolio is invested 40…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 5P

See similar textbooks

Related questions

Question

Consider the following information on a portfolio of three stocks:

State of Economy	Probability of State of Economy	Stock A Rate of Return	Stock B Rate of Return	Stock C Rate of Return
Boom	.25	.04	.33	.55
Normal	.60	.09	.13	.19
Bust	.15	.15	−.14	−.28

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.
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.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions