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Consider the following information: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B Stock C Boom
Consider the following information: |
State of Economy | Probability of State of Economy | Rate of Return if State Occurs | ||
---|---|---|---|---|
Stock A | Stock B | Stock C | ||
Boom | 0.68 | 0.27 | 0.33 | 0.17 |
Bust | 0.32 | 0.13 | 0.09 | 0.19 |
a. What is the expected return on an equally weighted portfolio of these three stocks? |
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b. What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C? |
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