Expected return and standard deviation. Use the following information to answer the questions. State of Economy Probability of State Return on Asset R in State Return on Asset S in State Return on Asset T in State Boom 0.25 0.020 0.270 0.490 Growth 0.35 0.020 0.110 0.280 Stagnant 0.22 0.020 0.140 0.020 Recession 0.18 0.020 −0.030 −0.150 a. What is the expected return of each asset? b. What are the variance and the standard deviation of each asset? c. What is the expected return of a portfolio with equal investment in all three assets? d. What is the portfolio's variance and standard deviation using the same asset weights in part (c)? Hint: Make sure to round all intermediate calculations to at least seven (7) decimal places. a. What is the expected return of asset R? (Round to four decimal places.) What is the expected return of asset S? (Round to four decimal places.) What is the expected return of asset T? (Round to four decimal places.) b. What is the variance of asset R? (Round to four decimal places.) What is the variance of asset S? (Round to four decimal places.) What is the variance of asset T? (Round to four decimal places.) What is the standard deviation of asset R? (Round to four decimal places.) What is the standard deviation of asset S? (Round to four decimal places.) What is the standard deviation of asset T? (Round to four decimal places.) c. What is the expected return of a portfolio with equal investment in all three assets? (Round to four decimal places.) d. What is the portfolio's variance using the same asset weights from part (c)? (Round to four decimal places.) What is the portfolio's standard using the same asset weights from part (c)? (Round to four decimal places.)

Expected return and standard deviation. Use the following information to answer the questions. State of Economy Probability of State Return on Asset R in State Return on Asset S in State Return on Asset T in State Boom 0.25 0.020 0.270 0.490 Growth 0.35 0.020 0.110 0.280 Stagnant 0.22 0.020 0.140 0.020 Recession 0.18 0.020 −0.030 −0.150 a. What is the expected return of each asset? b. What are the variance and the standard deviation of each asset? c. What is the expected return of a portfolio with equal investment in all three assets? d. What is the portfolio's variance and standard deviation using the same asset weights in part (c)? Hint: Make sure to round all intermediate calculations to at least seven (7) decimal places. a. What is the expected return of asset R? (Round to four decimal places.) What is the expected return of asset S? (Round to four decimal places.) What is the expected return of asset T? (Round to four decimal places.) b. What is the variance of asset R? (Round to four decimal places.) What is the variance of asset S? (Round to four decimal places.) What is the variance of asset T? (Round to four decimal places.) What is the standard deviation of asset R? (Round to four decimal places.) What is the standard deviation of asset S? (Round to four decimal places.) What is the standard deviation of asset T? (Round to four decimal places.) c. What is the expected return of a portfolio with equal investment in all three assets? (Round to four decimal places.) d. What is the portfolio's variance using the same asset weights from part (c)? (Round to four decimal places.) What is the portfolio's standard using the same asset weights from part (c)? (Round to four decimal places.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Related questions

Question

Expected return and standard

deviation.

Use the following information to answer the questions.

State of Economy	Probability of State	Return on Asset R in State	Return on Asset S in State	Return on Asset T in State
Boom		0.25		0.020	0.270	0.490
Growth		0.35		0.020	0.110	0.280
Stagnant		0.22		0.020	0.140	0.020
Recession		0.18		0.020	−0.030	−0.150

a. What is the expected return of each asset?

b. What are the variance and the standard deviation of each asset?

c. What is the expected return of a portfolio with equal investment in all three assets?

d. What is the portfolio's variance and standard deviation using the same asset weights in part

(c)?

Hint: Make sure to round all intermediate calculations to at least seven (7) decimal places.

a. What is the expected return of asset R?