Question
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 0.25 0.32 0.44 0.60 Normal 0.40 0.24 0.22 0.20 Bust 0.35 0.02 0.24 0.40
a-1. If your portfolio is invested 30% each in A and B and 40% 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 4.60%, 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 %
c-1. If the expected inflation rate is 2.60%, 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 %
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