Your portfolio is invested 28 percent each in A and C and 44 percent in B. What

Question

Your portfolio is invested 28 percent each in A and C and 44 percent in B. What is the expected return of the portfolio? Variance of the portfolio? Standard Deviation of portfolio?

Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C         Boom 0.17     0.364     0.464     0.344             Good 0.43     0.134     0.114     0.184             Poor 0.33     0.024     0.034     0.089             Bust 0.07     0.124     0.264     0.104    

Your portfolio is invested 28 percent each in A and C and 44 percent in B. What is the expected return of the portfolio? Variance of the portfolio? Standard Deviation of portfolio?

Explanation / Answer

Rate of Return If State Occurs

Stock A Return Stock B Return Stock C Return         Boom 0.17 0.364 0.06188 0.464 0.07888 0.344 0.05848         Good 0.43 0.134 0.05762 0.114 0.04902 0.184 0.07912         Poor 0.33 0.024 0.00792 0.034 0.01122 -0.089 -0.02937         Bust 0.07 -0.124 -0.00868 -0.264 -0.01848 -0.104 -0.00728 Total 0.11874 0.12064 0.10095 Investment 28% 44% 28% Expected Return 0.033 0.053 0.028 Expected Return of portpolio 11.5%

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