If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio’s expected return? The variance? The standard deviation? Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., .16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16. If the expected T-bill rate is 3.4 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 6P
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Consider the following information on a portfolio of three stocks:

State of Economy Probability of State of Economy Stock A Rate of Return Stock B Rate of Return Stock C Rate of Return
Boom .25 .04 .33 .55
Normal .60 .09 .13 .19
Bust .15 .15 −.14 −.28
  1. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio’s expected return? The variance? The standard deviation?

    Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., .16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16.

  2. If the expected T-bill rate is 3.4 percent, what is the expected risk premium on the portfolio?

    Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

 
 
 
 
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