Given the following information, what is the expected return on a portfolio that is invested 30 percent in both Stocks A and C, and 40 percent in Stock B? Rate of Return if State Occurs: Stock B (%) State of Probability of Economy State Occurring Stock A (%) Boom 15.6 Normal 11.2 Recession 2.5 .08 .87 .05 13.2 9.6 1.2 Stock C (%) 12.9 8 -5.6

es Consider the following information on three stocks: State of Economy Boom Normal Bust Probability of State of Economy .20 .40 .40 Rate of Return If State Occurs Stock A .34 .25 .03 Stock B .46 .23 -.25 Stock C .50 .20 - .42 a-1. If your portfolio is invested 35 percent each in A and B and 30 percent in C, what is the portfolio expected return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .32161.) a-3. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the expected T-bill rate is 4.50 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations abd enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. If the expected inflation rate…

Listed below is the return probability distribution associated with the stocks of XYZ Company and the market portfolio under different states of the economy: State Recession Normal Boom 0.00452 O 0.00552 0.00652 Probability O 0.00752 0.4 0.3 0.3 XYZ Return What is the covariance between XYZ return and Market return? -3% 14% 20% Market Return 2% 8% 16%

1. Suppose your expectations regarding the stock market are as follows: State of the Probability HPR Economy Boom 0.3 33% Normal growth 0.3 19 Recession 0.4 -15 a. What is the expected return, variance and standard deviation? 2. Assume that you manage a risky portfolio with an expected rate of return of 13% and a standard deviation of 29%. The T-bill rate is 5%. Your client chooses to invest 75% of a portfolio in your fund and 25% in a T-bill money market fund. a. What is the expected return and standard deviation of your client's portfolio? b. What is the reward-to-volatility ratio (S) of your risky portfolio and your client's overall portfolio? Explain the sharp ratio.