State of Economy Boom Normal Bust Probability of State of Economy .20 45 .35 Rate of Retur Stock A 28 22 .00 if State Occurs Stock C 56 Stock B 40 20 -.20 18 -.48 a-1. If your portfolio is invested 30 percent each in A and B and 40 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., .16161.) 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 4.20 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. If the expected inflation rate is 3.80 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-2. What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
State of Economy Boom Normal Bust Probability of State of Economy .20 45 .35 Rate of Retur Stock A 28 22 .00 if State Occurs Stock C 56 Stock B 40 20 -.20 18 -.48 a-1. If your portfolio is invested 30 percent each in A and B and 40 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., .16161.) 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 4.20 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. If the expected inflation rate is 3.80 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-2. What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
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
vv.2
Transcribed Image Text:State of Economy
Boom
Normal
Bust
Probability of State
of Economy
20
45
35
Rate of Return if State Occurs
Stock B
40
20
- 20
a-1. Portfolio expected return
a-2. Variance
a-3. Standard deviation
b. Expected risk premium
c-1. Approximate expected real return
c-1. Exact expected real return
c-2. Approximate expected real risk premium
c-2. Exact expected real risk premium
Stock A
28
22
.00
a-1. If your portfolio is invested 30 percent each in A and B and 40 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., .16161.)
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 4.20 percent, what is the expected risk premium on the
portfolio? (Do not round intermediate calculations and enter your answer as a
percent rounded to 2 decimal places, e.g., 32.16.)
c-1. If the expected inflation rate is 3.80 percent, what are the approximate and exact
expected real returns on the portfolio? (Do not round intermediate calculations
and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
c-2. What are the approximate and exact expected real risk premiums on the portfolio?
(Do not round intermediate calculations and enter your answers as a percent
rounded to 2 decimal places, e.g., 32.16.)
7.89%
Stock C
56
18
- 48
0.07236
26.90
%
3.69
%
4.09
%
3.94
%
3.69 %
3.54
%
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