10.00 points Consider the following information: Rate of Return If State Occurs

Question

10.00 points Consider the following information: Rate of Return If State Occurs State of Probability of of Economy Stock B Stock A 35 20 02 16 45 16 05 20 25 Good Poor Bust 20 45 25 10 -03 a. Your portfolio is invested 24 percent each in A and C, and 52 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculaitons. Enter your answer as a percent rounded to 2 decimal places, e.g, 32.16.) b 1 What is the variance df tis portoli? (Do not round intermediate calculations and round your b 2 What is the standard deviation? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Hints References eBook & Resources 0 Type here to search

Explanation / Answer

Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B stock C Boom 0.2 0.35 0.45 0.25 Good 0.45 0.2 0.16 0.09 Poor 0.25 -0.02 -0.05 -0.03 Bust 0.1 -0.16 -0.2 -0.12 weight 0.24 0.52 0.24 return 0.139 0.1295 0.071 weight * return 0.03336 0.06734 0.01704 E(X) 11.77% weight * return^2 0.00463704 0.00872053 0.00120984 E(X^2) 0.01456741 variance 0.00070 standard deviation 2.65%

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