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Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A Stock B Stock C Boom 0.70 0.25 0.19 0.09

	Rate of Return if State Occurs
State of Economy	Probability of State of Economy	Stock A	Stock B	Stock C
Boom	0.70	0.25	0.19	0.09
Bust	0.30	0.09	0.09	0.03

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

b. What is the variance of a portfolio invested 30 percent each in A and B and 40 percent in C?

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