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Returns and variances Consider the following information Rate of Return If State Occurs State of Economy Probability of States Economy Stock A Stock B Stock

Returns and variances Consider the following information Rate of Return If State Occurs

State of Economy Probability of States Economy Stock A Stock B Stock C

BOOM .35 .07 .15 .33

BUST .65 .13 .03 -.06

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

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

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