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		0.70			0.14			0.21			0.39
Bust		0.30			0.12			0.02			-0.07

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

Expected return

%

b.	What is the variance of a portfolio invested 25 percent each in A and B and 50 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places. (e.g., 32.161616))

Variance