Your portfolio is invested 30 percent each in A and C and 40 percent in B. What

Question

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).)

Explanation / Answer

Requirement 1:

Expected return = Sum of (weight * return * probability) of stock A , B and C

Expected return of the portfolio=(0.365 *0.18 + 0.135 *0.42 + .025*0.32 - .125*0.08)*30% + (0.465*0.18 + 0.115 *0.42 + .035 *0.32 - 0.265 * 0.08 )*40% + (0.345 * 0.18 + 0.185 * 0.42 - 0.090*0.32 - 0.105*0.08) *30%

= (0.0657 + 0.0567 + 0.008 - 0.01) *30% + (0.0837 + 0.0483 + 0.0112 -0.0212)*40% + (0.0621+0.0777 -0.0288-0.0084) * 30%

= (0.1204)30% + (0.122)40% + (0.1026)30%

= 3.612% + 4.88% + 3.078%

= 11.57%

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