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Your portfolio is invested 31 percent each in A and C and 38 percent in B. What

ID: 2660455 • Letter: Y

Question


Your portfolio is invested 31 percent each in A and C and 38 percent in B. What is the expected return of the portfolio? (Do not include the percent sign (%). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

What is the variance of this portfolio? (Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 5 decimal places (e.g., 32.16161).)

What is the standard deviation of this portfolio? (Do not include the percent sign (%). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Consider the following information:

Explanation / Answer

Market Return [R]

Probability

E[R]

E[R^2]

Boom

0.31*0.351 + 0.38*0.451 + 0.31*0.331

0.3828

0.16

0.061248

0.023446

Good

0.31*0.121 + 0.38*0.101 + 0.31*0.171

0.1289

0.44

0.056716

0.007311

Poor

0.31*0.011 + 0.38*0.021 + 0.31*-0.051

-0.00442

0.34

-0.0015

6.64E-06

Bust

0.31*-0.111 + 0.38*-0.251 + 0.31*-0.091

-0.158

0.06

-0.00948

0.001498

TOTAL

1

0.106981

0.032261

A
Expected Return = E[R] = 0.10698

B
Variance of Portfolio = E[R^2]

Market Return [R]

Probability

E[R]

E[R^2]

Boom

0.31*0.351 + 0.38*0.451 + 0.31*0.331

0.3828

0.16

0.061248

0.023446

Good

0.31*0.121 + 0.38*0.101 + 0.31*0.171

0.1289

0.44

0.056716

0.007311

Poor

0.31*0.011 + 0.38*0.021 + 0.31*-0.051

-0.00442

0.34

-0.0015

6.64E-06

Bust

0.31*-0.111 + 0.38*-0.251 + 0.31*-0.091

-0.158

0.06

-0.00948

0.001498

TOTAL

1

0.106981

0.032261