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Consider the following information about three stocks: Rate of Return if State Occurs State of Economy Boom Normal Bust Probability of State of Economy 20

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Consider the following information about three stocks: Rate of Return if State Occurs State of Economy Boom Normal Bust Probability of State of Economy 20 .50 .30 Stock A 38 21 .05 Stock B .50 .16 - 28 Stock C .54 13 -.45 a-1. If your portfolio is invested 35 percent each in A and B and 30 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 4.70 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 4.20 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.) % % 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 %

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