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Consider the following information: Rate of Return if State Occurs State ofEconomy Probability of State ofEconomy Stock A Stock B Stock C Boom 0.65 0.07

  1. Consider the following information:

Rate of Return if State Occurs

State ofEconomy

Probability of State ofEconomy

Stock A

Stock B

Stock C

Boom

0.65

0.07

0.15

0.33

Bust

0.35

0.13

0.03

0.06

  1. What is the expected return on an equally weighted portfolio of these three stocks?
  2. What is the variance of a portfolio invested 20% each in A and B and 60% in C?

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