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Rate of Return if State Occurs State of Probability of State Economy of Economy Stock A Stock B Stock C Boom .75 .07 .01 .27
Rate of Return if State Occurs | ||||
State of | Probability of State | |||
Economy | of Economy | Stock A | Stock B | Stock C |
Boom | .75 | .07 | .01 | .27 |
Bust | .25 | .12 | .19 | .05 |
Required: |
(a) | What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) |
Expected return | % |
(b) | What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C? |
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