You bought shares of stock from Tesla, Target, and Toyota. You feel like every year in the future will be randomly either "spectacular" or "depressing". Rate of Return if State Occurs State of Economy Probability of State of Economy Stock of Tesla Stock of Target Stock of Toyota Spectacular 0.70 0.13 0.05 0.13 Depressing 0.30 0.13 0.13 0.13 Requirement 1: If you bought an equally weighted portfolio of Tesla, Target, and Toyota shares, what return would you expect to receive every year on your stock investment? (Do not round your intermediate calculations.) (Click to select) 11.13% 13.63% 23.16% 25.93% 5.40% Requirement 2: What do you expect the variance of your portfolio returns to be, if you invested 10 percent of your money in Tesla's shares, same proportion in Target's shares, and 80 percent in Toyota's shares? (Do not round your intermediate calculations.) (Click to select) 0.008013 0.005513 0.007713 0.003513 0.000013 rev: 09_20_2012, 10_19_2015_QC_CS-21001, 03_30_2016_QC_CS-46530 This is the last question in the assignment. To submit, use Alt + S. To access other questions, proceed to the question map button.Next Visit question map Question10of10Total10 of 10 Prev Expert Answer Rachit Rachit answered this Was this answer helpful? 0 1 3,812 answers Requirement 1: E(r) = \sum_{i=1}^{n} [Pi x Ri] E(rTesla) = [0.70 x 0.13] + [0.30 x 0.13] = 0.091 + 0.039 = 0.13, or 13% E(rTarget) = [0.70 x 0.05] + [0.30 x 0.13] = 0.035 + 0.039 = 0.074, or 7.40% E(rToyota) = [0.70 x 0.13] + [0.30 x 0.13] = 0.091 + 0.039 = 0.13, or 13% E(rP) = [(1/3) x 13%] + [(1/3) x 7.40%] + [(1/3) x 13%] = 4.33% + 2.47% + 4.33% = 11.13% Hence, Option "A" is correct. Requirement 2: E(rP) = [0.10 x 13%] + [0.10 x 7.40%] + [0.80 x 13%] = 1.30% + 0.74% + 10.40% = 12.44%, or 0.1244 \sigma2 = \sum_{i=1}^{n} [Pi x (E(rP) - Ri)2] = [0.10 x (0.1244 - 0.13)2] + [0.10 x (0.1244 - 0.074)2] + [0.80 x (0.1244 - 0.13)2] = 0.000003136 + 0.000254016 + 0.000025088 = 0.00028224 Hide comments (2) Comments Anonymous posted 1 hour ago Edit Delete The answer for the Requirement is correct, but Requirement 2 is an incorrect answer...it's not appearing on the choice selection! Could someone review it and redo it, please? Anonymous posted 1 hour ago Edit Delete I posted 2 comments stating that Requirement 2 is incorrect because the answer given doesn't appear in the selection choice of answers(=click to select). The answer should be one of these: 0.008013 0.005513 0.007713 0.003513 0.000013