State of Economy Boom Recession Probability of State Economy 40.00% 60.00% Rate of Return if State of Economy occurs Stock Ice Bear Stock Grizzly Stock Panda 10.00% 8.00% 15.00% 4.00% 20.00% 0.00% 2. What is the portfolio expected return if half of the portfolio were in Ice Bear, with remainder equally divided between Grizzly & Panda?

Consider the following information: State of Economy Boom Good Poor Bust Probability of State- of Economy a. 15 .55 .25 .05 a. Expected return b-1. Variance b-2. Standard deviation Rate of Return if State Occurs Stock A Stock B Stock C .39 .49 .29 .15 .20 .08 -.09 -.07 -.24 -.10 Your portfolio is invested 24 percent each in A and C, and 52 percent in B. What the expected return of the portfolio? (Do not round intermediate calculations a enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-1. What is the variance of this portfolio? (Do not round intermediate calculations an round your answer to 5 decimal places, e.g., .16161.) b-2. What is the standard deviation? (Do not round intermediate calculations and ent your answer as a percent rounded to 2 decimal places, e.g., 32.16.) -.01 -.20 % %

State of Economy Recession Normal Boom Probability of State of Economy 0.10 0.70 0.20 COPY Rate of Return if State Occurs UNGHAY Stock A 0.06 0.08 0.15 Required: Given that the expected return for Stock A is 9.200%, calculate the standard deviation for Stock A. (Do not round your intermediate calculations.) (Click to select) Stock B -0.17 0.13 0.34 CONTAINE

Consider the following scenario analysis: Scenario Recession Normal economy Boom Rate of Return Probability Stocks Bonds 0.20 -6% 17% 0.60 19% 9% 0.20 30% 5% a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? b. Calculate the expected rate of return and standard deviation for each investment. c. Which investment would you prefer? × Answer is not complete.

You decide to invest in a portfolio consisting of 26 percent Stock A, 49 percent Stock B, and the remainder in Stock C. Based on the following information, what is the variance of your portfolio? State of Economy Recession Normal Boom Probability of State Economy .116 .669 .215 Multiple Choice Return if State Occurs Stock B -3.70% Stock A -10.30% 9.60% 21.59% 10.70% 25.19% Stock C -12.70% 17.10% 29.89%

Security Returns if State Occurs State of Economy Bust Boom Probability of State of Economy Roll Ross .60 40 -15% 19% 26 6 Calculate the expected return on a portfolio of 70 percent Roll and 30 percent Ross by filling in the following table: (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) State of Economy Probability of State of Economy Portfolio Return if Product State Occurs Bust .60 % Boom 40 % E(Rp) % % 5.12%

5 Consider the following information: Probability of State of State of Economy Boom Good Poor Bust Economy 15 .45 .35 .05 a. Rate of Return if State Occurs a. Expected return b-1. Variance b-2. Standard deviation Stock A Stock B Stock C .36 46 .26 .21 .17 10 -.03 -.17 Your portfolio is invested 22 percent each in A and C, and 56 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-1. What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.) b-2. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % -.06 -.21 % -.04 -.07

Could part 2 be answered

Consider the following scenario analysis: Scenario Recession Normal economy Boom Assume a portfolio with weights of 0.60 in stocks and 0.40 in bonds. a. What is the rate of return on the portfolio in each scenario? b. What are the expected rate of return and standard deviation of the portfolio? Required A Probability 0.3 0.6 0.1 Required B Recession Normal economy Boom Rate of Return Complete this question by entering your answers in the tabs below. Stocks -5% 13 24 Rate of Return % % 15.6 % Bonds 12% 9 3 What is the rate of return on the portfolio in each scenario? Note: Enter your answer as a percent rounded to 1 decimal place.

Based on this image, how many stocks does it take to eliminate most of the diversifiable risk?