Your portfolio is invested 29 percent each in A and C and 42 percent in B. What

Question

Your portfolio is invested 29 percent each in A and C and 42 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).)

Answers on the previous post are incorrect

Explanation / Answer

Answer 1.

Expected Return Boom : 0.29(0.353) + 0.42(0.453) + 0.29(0.333) = 0.3892 = 38.92%

Expected Return Good : 0.29(0.123) + 0.42(0.103) + 0.29(0.173) = 0.1291 = 12.91%

Expected Return Poor : 0.29(0.013) + 0.42(0.023) + 0.29(-0.053) = - 0.00194 = - 0.194%

Expected Return Bust : 0.29(-0.113) + 0.42(-0.253) + 0.29(-0.093) = - 0.166 = - 16.6%

And the expected return portfolio is :

0.3892*0.18 + 0.1291*0.42 + 0.32*- 0.00194 + 0.08*- 0.166

= 0.1104 = 11.04%

Answer 2 a.

Variance = 0.18*(0.3892-0.1104)^2 + 0.42*(0.1291-0.1104)^2 + 0.32*(- 0.00194-0.1104)^2 + 0.08*(- 0.166-0.1104)^2

= 0.02429

Answer 2 b.

Standard Deviation = (0.02429)^(0.5) = 0.1558 = 15.58%

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