Consider the following information on a portfolio of three stocks: ...
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Accounting
| 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 | .15 | .02 | .32 | .60 |
| Normal | .55 | .10 | .12 | .20 |
| Bust | .30 | .16 | .11 | .35 |
| Required: | |
| (a) | If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolios expected return, the variance, and the standard deviation? (Do not round intermediate calculations. Round your variance answer to 5 decimal places (e.g., 32.16161) and input your other answers as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| Expected return | % |
| Variance | |
| Standard deviation | % |
| (b) | If the expected T-bill rate is 3.75 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| Expected risk premium | % |
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