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onsider the following information about three stocks: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B

onsider the following information about three stocks:

State of Economy Probability of State of Economy Rate of Return if State Occurs
Stock A Stock B Stock C
Boom 0.25 0.36 0.48 0.52
Normal 0.44 0.20 0.15 0.12
Bust 0.31 0.04 0.26 0.44

a-1. If your portfolio is invested 40% each in A and B and 20% in C, what is the portfolio expected return? (Do not round intermediate calculations. Enter the answer as a percent rounded to 2 decimal places.)

Portfolio expected return %

a-2. What is the variance? (Do not round intermediate calculations. Round the final answer to 8 decimal places.)

Variance

a-3. What is the standard deviation? (Do not round intermediate calculations. Enter the answer as a percent rounded to 2 decimal places.)

Standard deviation %

b. If the expected T-bill rate is 4.80%, what is the expected risk premium on the portfolio? (Do not round intermediate calculations. Enter the answer as a percent rounded to 2 decimal places.)

Expected risk premium %

c-1. If the expected inflation rate is 2.80%, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations. Enter the answers as a percent rounded to 2 decimal places.)

Approximate expected real return %
Exact expected real return %

c-2. What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations. Enter the answers as a percent rounded to 2 decimal places.)

Approximate expected real risk premium %
Exact expected real risk premium %

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