Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider the following information on three stocks: table [ [ , , , Rate of Return If State Occurs, ] , [ , ,

Consider the following information on three stocks:
\table[[,,,Rate of Return If State Occurs,],[,,,,],[State of,Probability of,,,],[Sconomy,State of,Stock A,Stock B,Stock C],[Boom,.25,.22,.34,.56],[Normal,.48,.19,.17,.15],[Bust,.27,.03,-.35,-.44]]
a-1. If your portfolio is invested 45 percent each in A and B and 10 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 3.90 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 3.50 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.)
image text in transcribed

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

Investment Analysis And Portfolio Management

Authors: Frank K. Reilly, Keith C. Brown

7th Edition

0324171730, 978-0324171730

More Books

Students also viewed these Finance questions