Problem 13-9 Returns and Variances [LO1]

Consider the following information:

				Rate of Return If State Occurs
State of	Probability of
Economy	State of Economy			Stock A			Stock B			Stock C
Boom		.58			.07			.15			.33
Bust		.42			.16			.06			.06

a.	What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected return

%

b.	What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., 32.161616.)

Variance