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Consider the following information about three stocks: State of Probability of State of Economy Boom Normal Bust Economy .25 .50 .25 Rate of Return
Consider the following information about three stocks: State of Probability of State of Economy Boom Normal Bust Economy .25 .50 .25 Rate of Return If State Occurs Stock A .34 14 .05 Stock B .46 .12 -.26 Stock C .58 .10 -.46 a-1. If your portfolio is invested 20 percent each in A and B and 60 percent in C, what is the portfolio expected return? a-2. What is the variance? a-3. What is the standard deviation? b. If the expected T-bill rate is 3.40 percent, what is the expected risk premium on the portfolio? c-1. If the expected inflation rate is 3.00 percent, what are the approximate and exact expected real returns on the portfolio? c-2. What are the approximate and exact expected real risk premiums on the portfolio?
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