Questions and Problems

Q$9,$ Q $11,$ Q$19($P$\mathrm{.}383-384)$

Q$9.$ Returns and Standard Deviations. Consider the following information:

$\backslash$table$[[\backslash$table$[[$State of$],[$Economy$]],\backslash$table$[[$Probability of$],[$State of Economy$]],$Rate of Return If State Occurs$],[$Stock B$,$Stock C$,],[$Boom$,\mathrm{.}75,\mathrm{.}07,\mathrm{.}01,\mathrm{.}27],[$Bust$,\mathrm{.}25,\mathrm{.}12,\mathrm{.}19,-\mathrm{.}05]]$

a$.$ What is the expected return on an equally weighted portfolio of these three stocks?

b$.$ What is the variance of a portfolio invested $20$ percent each in A and $B$ and $60$ percent in $C?$

Q $11.$ Calculating Portfolio Betas. You own a stock portfolio invested $15$ percent in Stock Q$,25$ percent in Stock R$,40$ percent in Stock S$,$ and $20$ percent in Stock T$.$ The betas for these four stocks are $\mathrm{.}85,\mathrm{.}91,1\mathrm{.}31,$ and $1\mathrm{.}76,$ respectively. What is the portfolio beta?