Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider the following information on three stocks: Rate of Return If State Occurs State of Economy Stock A Stock B Stock C Probability of State

image text in transcribed

Consider the following information on three stocks: Rate of Return If State Occurs State of Economy Stock A Stock B Stock C Probability of State of Economy .20 .50 .30 Boom Normal Bust .26 .10 .01 .38 .08 -.20 .50 .06 -.40 a-1. If your portfolio is invested 30 percent each in A and B and 40 percent in C, what is the portfolio expected return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .32161.) a-3. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the expected T-bill rate is 3.00 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations abd enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) C-1. If the expected inflation rate is 2.60 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) C-2. What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Create Wealth Over The Long Run Give Yourself The Life You Deserve

Authors: Micheal J. Bess

1st Edition

979-8865993711

More Books

Students also viewed these Finance questions