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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 0.20 0.20 0.32 0.54 Normal 0.45 0.18 0.16 0.14 Bust 0.35 0.02 0.34 0.42 a-1. If your portfolio is invested 40% each in A and B and 20% 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 4.00%, 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 2.00%, 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 %
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 0.20 0.20 0.32 0.54
Normal 0.45 0.18 0.16 0.14
Bust 0.35 0.02 0.34 0.42
a-1. If your portfolio is invested 40% each in A and B and 20% 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 4.00%, 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 2.00%, 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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