Your portfolio is invested 32 percent each in A and C and 36 percent in B. What

Question

Your portfolio is invested 32 percent each in A and C and 36 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

What is the variance of this portfolio? (Do not round intermediate calculations. Round your answer to 5 decimal places (e.g., 32.16161).)

What is the standard deviation of this portfolio? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Consider the following information:

Explanation / Answer

1.

Thus,

2(a)

Variance of the portfolio              = 210.27*.32+280.61*.36+273.66*.32

                                                   = 255.88

2(b)

Standard deviation is 15.7

Stock A Stock B Stock C State of Economy Probability of state of economy Rate of return Expected rate of return Rate of return Expected rate of return Rate of return Expected rate of return Boom 0.2 0.367 0.0734 0.467 0.0934 0.347 0.0694 Good 0.4 0.137 0.0548 0.117 0.0468 0.187 0.0748 Poor 0.3 0.027 0.0081 0.037 0.0111 -0.092 -0.0276 Bust 0.1 -0.127 -0.0127 -0.267 -0.0267 -0.107 -0.0107 Total 0.1236 0.1246 0.1059

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