Question
G. Jay has the following probability distribution of returns for her portfolio with 40% of her total investment in stock A, 40% in stock B,
G. Jay has the following probability distribution of returns for her portfolio with 40% of her total investment in stock A, 40% in stock B, and remaining in Stock C. The risk-free rate of return is 4.03%. Calculate the return on this portfolio, Standard Deviation of the portfolio, and then calculate the portfolio risk premium.
| State of Economy | Probability | Rate of Return | ||
| Stock A (%) | Stock B (%) | Stock C (%) | ||
| Boom | 5% | 7 | 15 | 28 |
| Normal | 80% | 9 | 12 | 17 |
| Recession | 15% | 10 | 2 | -35 |
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Personal Finance
Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes
11th International Edition
1259094901, 9781259094903
