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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 0.74 0.09 0.11 0.15

Rate of Return if State Occurs
State of Economy Probability of State of Economy Stock A Stock B Stock C
Boom 0.74 0.09 0.11 0.15
Bust 0.26 0.13 0.13 0.11
Requirement 1:

What is the expected return on an equally weighted portfolio of these three stocks? (Do not round your intermediate calculations.)

11.25% 12.43% 12.31% 9.60% 11.84%

Requirement 2:

What is the variance of a portfolio invested 30 percent each in A and B and 40 percent in C? (Do not round your intermediate calculations.)

0.000503 0.000001 0.000001 0.000001 0.005000

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