In: Finance
Consider the following information:
State of | Probability of State | Rate of Return if State Occurs | |||||||||||
Economy | of Economy | Stock A | Stock B | Stock C | |||||||||
Boom | .70 | .08 | .02 | .28 | |||||||||
Bust | .30 | .17 | .23 | – | .08 | ||||||||
a. What is the expected return on an equally
weighted portfolio of these three stocks? (Do not round
intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
Expected return
%
b. What is the variance of a portfolio invested 25
percent each in A and B and 50 percent in C? (Do not round
intermediate calculations and round your answer to 5 decimal
places, e.g., 32.16161.)
Variance of a portfolio