Consider the following information: State of Economy Probability of State of Economy Boom Bust .67 .33 a. Expected return b. Variance of portfolio Rate of Return if State Occurs Stock A Stock B 11.90% .10 .14 .04 .20 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to decimal places, e.g., 32.16. b. What is the variance of a portfolio invested 22 percent each in A and B and 56 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. Stock C .25 -.05
Consider the following information: State of Economy Probability of State of Economy Boom Bust .67 .33 a. Expected return b. Variance of portfolio Rate of Return if State Occurs Stock A Stock B 11.90% .10 .14 .04 .20 a. What is the expected return on an equally weighted portfolio of these three stocks? Note: Do not round intermediate calculations and enter your answer as a percent rounded to decimal places, e.g., 32.16. b. What is the variance of a portfolio invested 22 percent each in A and B and 56 percent in C? Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161. Stock C .25 -.05
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
Related questions
Question
![Consider the following information:
State of Economy Probability of State of Economy
Boom
Bust
67
.33
a. Expected return
b. Variance of portfolio
Rate of Return if State Occurs
Stock A
. 10
Stock B
.04
Stock C
25
.20
-.05
a. What is the expected return on an equally weighted portfolio of these three stocks?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
b. What is the variance of a portfolio invested 22 percent each in A and B and 56 percent in C?
Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.
11.90 %
.14](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd3db2c7e-4b78-424e-994f-24d0bbd1c619%2F08850d03-8496-4877-abb0-3963e64085e8%2F40dnlvo_processed.png&w=3840&q=75)
Transcribed Image Text:Consider the following information:
State of Economy Probability of State of Economy
Boom
Bust
67
.33
a. Expected return
b. Variance of portfolio
Rate of Return if State Occurs
Stock A
. 10
Stock B
.04
Stock C
25
.20
-.05
a. What is the expected return on an equally weighted portfolio of these three stocks?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
b. What is the variance of a portfolio invested 22 percent each in A and B and 56 percent in C?
Note: Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.
11.90 %
.14
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 5 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
![Corporate Finance (The Mcgraw-hill/Irwin Series i…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education