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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 .32 .44 .60 Normal .40 .24 .22 .20 Bust .35 .02 .24 .40 a-1. If your portfolio is invested 30 percent each in A and B and 40 percent in C, what is the portfolio expected return? (Do not round off.
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 4.40 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 4.00 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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