Consider the following information about three stocks:

If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio expected return? The variance? The standard deviation?

If the expected T-bill rate is 3.80 percent, what is the expected risk premium on the portfolio?

If the expected inflation rate is 3.50 percent, what are the approximate and exact expected real returns on the portfolio? What are the approximate and exact expected real risk premiums on the portfolio?

State of Economy	Probability	Stock A	Stock B	Stock C
Boom	20%	24%	36%	55%
Normal	55%	17%	13%	9%
Bust	25%	0%	-28%	-45%
Proportion invested		40%	40%	20%
T-Bill rate	3.80%
Expected inflation	3.50%

a)
E(Rp)
Variance
Standard deviation
b)
Risk premium
c)
Approximate real return
Exact real return
Approximate real risk premium
Exact real risk premium