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Consider the following information about three stocks: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B

Consider the following information about three stocks:

State of Economy Probability of State of Economy Rate of Return if State Occurs
Stock A Stock B Stock C
Boom .25 .36 .48 .52
Normal .44 .20 .15 .12
Bust .31 .04 .26 .44

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-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 4.60 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 4.10 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.

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