State of Economy Boom Normal Bust Probability of State of Economy 26 50 24 a-1. Portfolio expected return a-2. Variance a-3. Standard deviation Rate of Return if State Occurs Stock Stock B 26 38 19 - 38 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 21 05 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 4.10 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 3.70 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.) de % % de de de de % % % Stock C 55 17 - 46 %

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., 3216.) 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 colculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the expected T-bill rate is 4.10 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and enter your onswer as a percent rounded to 2 decimal places, e.g., 32.16.) c1. If the expected inflation rate is 370 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate colculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) c2 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, 3216.)