Consider the following information on a portfolio of three stocks: Required: If

Question

Consider the following information on a portfolio of three stocks: Required: If your portfolio is invested 36 percent each in A and B and 28 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).) If the expected T-bill rate is 4.6 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).)

Explanation / Answer

Variance = ( Standard Deviation )2 = (18.28)2 = 334.1584

Therefore, Variance = 334.1584.

b. Expected Risk premium = 12.03 - 4.6 = 7.43%

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