Consider the following information: Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A Stock B Stock C Boom 0.62 0.05 0.07 0.15 Bust 0.38 0.15 0.15 -0.09

a. What is the expected return on an equally weighted portfolio of these three stocks?

• 8.24%
• 10.74%
• 20.27%
• 23.04%
• 2.51%

b. What is the variance of a portfolio invested 30 percent each in A and B and 40 percent in C?

• 0.000416
• 0.005916
• 0.003916
• 0.008116
• 0.008416