Question
Consider the following information on three stocks: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B
Consider the following information on three stocks:
| State of Economy | Probability of State of Economy | Rate of Return if State Occurs | ||||||||
| Stock A | Stock B | Stock C | ||||||||
| Boom | .25 | .27 | .15 | .11 | ||||||
| Normal | .65 | .14 | .11 | .09 | ||||||
| Bust | .10 | .19 | .04 | .05 | ||||||
A portfolio is invested 45 percent each in Stock A and Stock B and 10 percent in Stock C. What is the expected risk premium on the portfolio if the expected T-bill rate is 3.2 percent?
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Offshore Finance And State Power
Authors: Andrea Binder
1st Edition
0192870122, 978-0192870124
