Consider the following information: Your portfolio is invested 31 percent each i

Question

Consider the following information: 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 round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Expected return of the portfolio % What is the variance of this portfolio? (Do not round intermediate calculations. Round your answer to 5 decimal places (e.g., 32.16161).) Variance of the portfolio 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).)

Explanation / Answer

Return Weight expected return in each state of the economy Weight x Return portfolio expected return Varaince =(Total of Weight *return-11.70%)^2* probability) Probability of A B C A B C A B C Total of Weight *return (Total of Weight *return)* probability Variance Boom 19.00% 36.60% 46.60% 34.60% 31.00% 38.00% 31.00% 11.35% 17.71% 10.73% 39.78% 7.56% 1.50% good 41.00% 13.60% 11.60% 18.60% 31.00% 38.00% 31.00% 4.22% 4.41% 5.77% 14.39% 5.90% 0.03% Poor 31.00% 2.60% 3.60% -9.10% 31.00% 38.00% 31.00% 0.81% 1.37% -2.82% -0.65% -0.20% 0.47% Bust 9.00% -12.60% -26.60% -10.60% 31.00% 38.00% 31.00% -3.91% -10.11% -3.29% -17.30% -1.56% 0.76% 100.00% 11.70% 2.00% portfolio expected return 11.70% Variance .02 Standard deviation square root of variance 14.14%

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