Expected return and standard

deviation.

Use the following information to answer the questions.

State of Economy		Probability of State		Return on Asset R in State		Return on Asset S in State		Return on Asset T in State
Boom		0.15		0.040		0.280		0.450
Growth		0.25		0.040		0.140		0.275
Stagnant		0.35		0.040		0.070		0.025
Recession		0.25		0.040		0.035		0.175

a.What is the expected return of each asset?

b.What are the variance and the standard deviation of each asset?

c.What is the expected return of a portfolio with equal investment in all three assets?

d.What is the portfolio's variance and standard deviation using the same asset weights in part

(c)?

Hint: Make sure to round all intermediate calculations to at least seven (7) decimal places. The input instructions, phrases in parenthesis after each answer box, only apply for the answers you will type.

a. What is the expected return of asset R?