Problem 13-9 Returns and Variances (LO1, 2) Consider the following information: State of Economy Probability of State of Economy 0.62 0.38 Boom Bust Rate of Return if State Occurs Stock B 0.17 0.06 Stock A 0.09 0.20 Stock C 0.35 -0.10 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do n Round the final answer to 2 decimal places.) Expected return % b. What is the variance of a portfolio invested 20% each in A and B and 60% in C? (Do not r the final answer to 6 decimal places.)
Problem 13-9 Returns and Variances (LO1, 2) Consider the following information: State of Economy Probability of State of Economy 0.62 0.38 Boom Bust Rate of Return if State Occurs Stock B 0.17 0.06 Stock A 0.09 0.20 Stock C 0.35 -0.10 a. What is the expected return on an equally weighted portfolio of these three stocks? (Do n Round the final answer to 2 decimal places.) Expected return % b. What is the variance of a portfolio invested 20% each in A and B and 60% in C? (Do not r the final answer to 6 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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Transcribed Image Text:Problem 13-9 Returns and Variances (LO1, 2)
Consider the following information:
State of
Economy
Probability of
State of Economy
0.62
0.38
Boom
Bust
Variance
Rate of Return if State Occurs.
Stock B
Stock C
0.17
0.35
0.06
-0.10
a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations.
Round the final answer to 2 decimal places.)
Expected return
b. What is the variance of a portfolio invested 20% each in A and B and 60% in C? (Do not round intermediate calculations. Round
the final answer to 6 decimal places.)
%
Stock A
0.09
0.20
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