a-1.

If your portfolio is invested 20 percent each in A and B and 60 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 3.40 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 3.00 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.)

Rate of Return If State Occurs State of Probability of Economy Economy Boom Normal Bust State of Stock A Stock C .25 .50 .25 .34 -14 .05 Stock B .46 -12 -.26 .58 .10 -.46