P13-10 Returns and Standard Deviations [LO1] Consider the following information

Question

P13-10 Returns and Standard Deviations [LO1] Consider the following information Rate of Return if State Occurs Probability of State of Economy 20 State of Economy Boom Good Poor Bust Stock A 36 20 -.04 -.14 Stock B Stock C 26 46 17 .20 05 -.07 -.32 -.06 .09 Requirement 1: Your portfolio is invested 26 percent each in A and C, and 48 percent in B. What is the expected return of the portfolio? (Do not round your intermediate calculations.) (Click to select) Requirement 2: (a) What is the variance of this portfolio? (Do not round your intermediate calculations.) Click to select) (b) What is the standard deviation? (Do not round your intermediate calculations.) Click to select) v

Explanation / Answer

Average = 14.30%

variance = 0.026187

standard dev = 16.1825%

p(x) return p*x p*(x - mean)^2 0.2 38.2% 0.0764 0.0114223 0.55 16.2% 0.08921 0.0002023 0.2 -6.0% -0.01192 0.0082110 0.05 -21.3% -0.01067 0.006351761

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