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Consider the following information about three stocks: State ofEconomyProbability of State of EconomyRate of Return if State OccursStock AStock BStock CBoom 0 . 2 0

Consider the following information about three stocks: State ofEconomyProbability of State of EconomyRate of Return if State OccursStock AStock BStock CBoom 0.200.380.500.50 Normal 0.550.160.140.12 Bust 0.250.000.300.50 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 9.62% a-2. What is the variance? (Do not round intermediate calculations. Round the final answer to 8 decimal places.) Variance 0.06530 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 25.55% b. If the expected T-bill rate is 3.70%, 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 5.92% 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 return7.02%Exact expected real return6.84% 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 premium3.32%Exact expected real risk premium0.92%

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