Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Consider the following information about three stocks: Rate of Return if State Occurs Stock A Stock B Stock C State of Economy Boom Normal Bust
Consider the following information about three stocks: Rate of Return if State Occurs Stock A Stock B Stock C State of Economy Boom Normal Bust Probability of State of Economy 0.22 0.46 0.32 0.30 0.23 0.01 0.42 0.21 -0.22 0.58 0.19 -0.50 a-1. If your portfolio is invested 25% each in A and B and 50% in C, what is the portfolio expected return? (Do not round intermediate calculations. Enter the answer as a percent rounded to 2 decimal places.) Portfolio expected return % a-2. What is the variance? (Do not round intermediate calculations. Round the final answer to 8 decimal places.) Variance a-3. What is the standard deviation? (Do not round intermediate calculations. Enter the answer as a percent rounded to 2 decimal places.) Standard deviation % b. If the expected T-bill rate is 4.50%, what is the expected risk premium on the portfolio? (Do not round intermediate calculations. Enter the answer as a percent rounded to 2 decimal places.) Expected risk premium 1% C-1. If the expected inflation rate is 2.50%, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations. Enter the answers as a percent rounded to 2 decimal places.) % Approximate expected real return Exact expected real return c-2. What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations. Enter the answers as a percent rounded to 2 decimal places.) Approximate expected real risk premium Exact expected real risk premium
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started