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9. Returns and Standard Deviations Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A

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9. Returns and Standard Deviations Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A Stock B Stock C Boom .20 .24 .45 .33 Good .35 .09 .10 .15 Poor .40 .03 -.10 -.05 Bust .05 -.05 -.25 -.09 a. Your portfolio is invested 30 percent each in A and C and 40 percent in B. What is the expected return of the portfolio? b. What is the variance of this portfolio? The standard deviation

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