Consider the following information: Your portfolio is invested 30 percent each i

Question

Consider the following information:

Your portfolio is invested 30 percent each in A and C and 40 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

What is the variance of this portfolio? (Do not round intermediate calculations. Round your answer to 5 decimal places (e.g., 32.16161).)

What is the standard deviation of this portfolio? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C         Boom .20     .355     .455     .335             Good .40     .125     .105     .175             Poor .30     .015     .025     .055             Bust .10     .115     .255     .095    

Explanation / Answer

2)

b)Standard deviation = square root of variance

                                = square root of 2.89219

                                =1.70%

             

State of economy Probability Stock A (expected return) Stock B(expected return) Stock C boom .20 .355 .071 .455 .091 .335 .067 good .40 .125 .05 .105 .042 .175 .07 poor .30 .015 .0045 .025 .0075 -.055 -.0165 bust .10 -.115 -.0115 -.255 -.0255 -.095 -.0095 Expected return .114 .115 .111

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