Consider the following information on a portfolio of three stocks It your portfo

Question

Consider the following information on a portfolio of three stocks It 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, 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. If the expected T-bill rate is 4 25 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

Explanation / Answer

Expected Return= (R(A)*WA)+(RB*WB)+RC*WC)

=(10.88*.4)+(9.54*.4)+(6.30*.2) = 9.43%

Standard Deviation =17.87%

Average Return State of Eco. Probablity Return A % Return B % Return C % A B C Boom 0.13 2 32 50 0.26 4.16 6.50 Normal 0.55 10 22 20 5.50 12.10 11.00 Bust 0.32 16 -21 -35 5.12 -6.72 -11.20 10.88 9.54 6.30

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