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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

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

0.27

0.025

0.280

0.440

Growth

0.37

0.025

0.130

0.350

Stagnant

0.22

0.025

0.160

0.040

Recession

0.14

0.025

0.035

0.165

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?

The expected return of asset S is

The expected return of asset T is

b. What is the variance of asset R?

The variance of asset S is

The variance of asset T is

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)?

The expected return of the portfolio in the boom state is

The expected return of the portfolio in the growth state is

The expected return of the portfolio in the stagnant state is

The expected return of the portfolio in the recession state is

The variance of the portfolio is:

The standard deviation of the portfolio is:

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