Consider the following information: Your portfolio is invested 25 percent each i

Question

Consider the following information:

Your portfolio is invested 25 percent each in A and C, and 50 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

What is the standard deviation? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

   

Rate of Return if State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C   Boom .35 .21 .42 .30   Good .20 .14 .21 .12   Poor .30 .02 –.09 –.05   Bust .15 –.06 –.26 –.09

Explanation / Answer

Ans) Boom: ERp= 0.3375 Good: ERp= 0.170 Poor: ERp= -0.0525 Bust: ERp= -0.168 Expected Return on the portfolio= Erp= 0.111 11.125 % Variance of the Portfolio= 0.017956 0.000696 0.00802 0.011676 Variance of the Portfolio= 0.03835 Standard Deviaton of Portfolio= 0.007209

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