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Q4 (25 marks) Consider the following information: Rate of Return if State Occurs State ofEconomy Probability of State ofEconomy Stock A Stock B Stock C

Q4 (25 marks)
Consider the following information:
Rate of Return if State Occurs
State ofEconomy
Probability of State ofEconomy
Stock A
Stock B
Stock C
Boom
0.65
0.07
0.15
0.33
Bust
0.35
0.13
0.03
0.06
Shape
What is the expected return on an equally weighted portfolio of these three stocks?
What is the variance of a portfolio invested 20% each in A and B and 60% in C?

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