Question
Consider the following information on 3 stocks: State of economy | Probability of State of Economy | Stock A | Stock B | Stock C
Consider the following information on 3 stocks:
State of economy | Probability of State of Economy | Stock A | Stock B | Stock C
Boom | .30 | .36 | .48 | .60
Normal | .40 | .15 | .13 | .11
Bust .30 | .06 | -.28 | -.48
A1) If your portfolio is invested in 25% each in A and B and 50% in C, what is the portfolio expected return? (Do not round intermediate calculations)
A2) What is the variance? (Do not round intermediate calculations.)
A3) What is the standard deviation? (Do not round intermediate calculations).
B) If the expected T-Bill rate is 3.5%, what is the expected risk premium on the portfolio? (Do not round intermediate calculations.)
C1) If the expected inflation rate is 3.1%, what are the approximate and exact expected returns on portfolios? (Do not round intermediate calculations.)
C2) What are the approximate and exact expected real risk premiums on the portfolio? (do not round intermediate calculations.
Please show answers but also calculations behind the answers.
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