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 .10 .35 .42

Normal .52 .18 .30 .28

Bust .35 .19 -.29 -.38

a. If your portfolio is invested 42 percent each in A and B and 16 percent in C, what is the portfolios expected return, the variance, and the standard deviation?

b. If the expected T-bill rate is 4.65 percent, what is the expected risk premium on the portfolio?