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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 .15 .04 .34 .48 Normal .53 .12 .24 .22 Bust .32 .18 .23 .37 If your portfolio is invested 36 percent each in A and B and 28 percent in C, what is the portfolios expected return, the variance, and the standard deviation? If the expected T-bill rate is 4.35 percent, what is the expected risk premium on the portfolio?

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