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Rate of Return if State Occurs Probability of State State of Economy of Economy Boom .20 Stock A .38 Stock B Stock C .50

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Rate of Return if State Occurs Probability of State State of Economy of Economy Boom .20 Stock A .38 Stock B Stock C .50 .54 Normal Bust .50 .21 .16 .13 .30 .05 -.28 -.45 a-1. If your portfolio is invested 35 percent each in A and B and 30 percent in C, what is the portfolio expected return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.) a-3. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the expected T-bill rate is 4.70 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. If the expected inflation rate is 4.20 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c-2. What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a-1. Portfolio expected return a-2. Variance % a-3. Standard deviation % b. Expected risk premium % c-1. Approximate expected real return % c-1. Exact expected real return % c-2. Approximate expected real risk premium % c-2. Exact expected real risk premium %

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