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Consider the following information on a portfolio of three stocks: State of Economy Probability of State of Economy Stock A Rate of Return Stock B

Consider the following information on a portfolio of three stocks:

State of Economy Probability of State of Economy Stock A Rate of Return Stock B Rate of Return Stock C Rate of Return
Boom .13 .08 .33 .54
Normal .54 .16 .18 .26
Bust .33 .17 .17 .36

a.

If your portfolio is invested 38 percent each in A and B and 24 percent in C, what is the portfolios expected return, the variance, and the standard deviation? (Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., 32.16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16.)

b. If the expected T-bill rate is 4.05 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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