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 A Stock B Stock C State of Economy Boom Normal Bust

image text in transcribed

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 .25 .60 .15 .21 .17 .00 .33 .11 -.21 .55 .09 -.45 a-1. If your portfolio is invested 40 percent each in A and B and 20 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- What is the variance? (Do not round intermediate calculations and round 2. your answer to 5 decimal places, e.g., .16161.) a- What is the standard deviation? (Do not round intermediate calculations and enter 3. your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the expected T-bill rate is 3.80 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 3.30 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- What are the approximate and exact expected real risk premiums on the portfolio? 2. (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 Exact expected real return Approximate expected real risk C-2. premium Exact expected real risk premium % % % % % %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored 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

Recommended Textbook for

The Handbook Of Equity Market Anomalies

Authors: Leonard Zacks

1st Edition

0470905905, 978-0470905906

More Books

Students also viewed these Finance questions

Question

Describe the new structures for the HRM function. page 676

Answered: 1 week ago