Question

Consider the following information:

  

				Rate of Return if State Occurs
State of	Probability of
Economy	State of Economy			Stock A			Stock B			Stock C
Boom		0.64			0.11			0.20			0.38
Bust		0.36			0.18			0.10		−	0.04
a. What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))   Expected return 17.60%      b. What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places. (e.g., 32.161616)) VARIANCE = ___ ?

Answer 1