v LTE 50 To years. The rate of return will be 0.70 percent per month for the first two years. It will go up to 1.00 percent for the rest of the period. Compute the $ amount to set aside today to reach her objective. (6 marks) Question 3 Your employer has asked you to investigate the firm's portfolio risk and return. The portfolio comprises three stocks. It is invested 50 percent in stock A, 30 percent in stock B and 20 percent in stock C. You gathered the following information: TABLE 1. Fimm Portfolio Data - Expected retums on component stocks (%) in function of the state of the economy State of the Probability of State of Rate of Return (%) for each State of the Economy Economy the Economy Stock A Stock B Stock C Good 60.00% 3.00% 34.00% 70.00% Poor 40.00% 15.00% -12.00% -35.00% (8 marks) Determine what is the portfolio's expected return. (a) (8 marks) Determine the portfolio's variance and standard deviation. (b) (C) Assume that the expected risk-free rate is 2.75 percent. Determine the expected risk premium on the portfolio. (4 marks)