Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider the following information about three stocks: Rate of Return If State Occurs Stock B State of Economy Boom Normal Bust Probability of State of

image text in transcribed
Consider the following information about three stocks: Rate of Return If State Occurs Stock B State of Economy Boom Normal Bust Probability of State of Economy 22 .46 32 Stock A .30 .23 .01 42 21 Stock C .58 .19 --50 -22 . a-1. If your portfolio is invested 25 percent each in A and B and 50 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 4.30 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.) 0-1. If the expected inflation rate is 3.90 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.) 10.09% 0.08703 29.50% a-1. Portfolio expected return a-2. Variance a-3. Standard deviation b. Expected risk premium c-1. Approximate expected real return Exact expected real retur c-2. Approximate expected real risk premium Exact expected real risk premium 5.79% % % % %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions

Question

Define observational learning.

Answered: 1 week ago