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ANSWER Rate of Return if State Occurs State of Probability of State Economy of Economy Stock A Stock B Stock C Boom .66 .09 .03

ANSWER

Rate of Return if State Occurs
State of Probability of State
Economy of Economy Stock A Stock B Stock C
Boom .66 .09 .03 .24
Bust .34 .13 .19 .04

Required:
(a)

What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimalplaces(e.g., 32.16).)

Expected return %

(b)

What is the variance of a portfolio invested 21 percent each in A and B and 58 percent in C? (Do not round intermediate calculations. Round your answer to 5 decimal places (e.g., 32.16161).)

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