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In: Finance
Type or paste question here Consider the following information on a portfolio of three stocks: State...
Type or paste question here
| Consider the following information on a portfolio of three stocks: |
| State of Economy |
Probability
of State of Economy |
Stock A Rate of Return |
Stock B Rate of Return |
Stock C Rate of Return |
| Boom | .13 | .04 | .34 | .58 |
| Normal | .53 | .12 | .14 | .22 |
| Bust | .34 | .18 | –.13 | –.37 |
| a. |
If your portfolio is invested 36 percent each in A and B and 28 percent in C, what is the portfolio’s expected return, the variance, and the standard deviation? (Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., 32.16161. Enter your other answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
| b. | If the expected T-bill rate is 3.85 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
|
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Solutions
jeff jeffy answered 1 year agoRelated Solutions
Portfolio returns and deviations. Consider the following information on a portfolio of three stocks: State of...
Portfolio returns and deviations. Consider the following
information on a portfolio of three stocks:
State of
Probability
of
Stock A Rate of return Stock B
ROR Stock C ROR
Economy
State of Economy
Boom
.15
.02
.32
.60
Normal
.60
.10
.12
.20
Bust
.25
.16
-.11
-.35
a. If your portfolio is invested 40 percent each in A and B and
20 percent in C, what is the portfolio's expected return? the
variance? the standard deviation?
b. if...
Consider the following information on a portfolio of three stocks: State of Economy Probability of State...
Consider the
following information on a portfolio of three stocks:
State of
Economy
Probability
of
State of Economy
Stock A
Rate of Return
Stock B
Rate of Return
Stock C
Rate of Return
Boom
.15
.04
.33
.55
Normal
.60
.09
.13
.19
Bust
.25
.15
–.14
–.28
a.
If your portfolio is invested 40 percent each in A and B and 20
percent in C, what is the portfolio’s expected return? The
variance? The standard deviation? (Do not...
Consider the following information on a portfolio of three stocks: State of Probability of Stock A...
Consider the following information on a portfolio of three
stocks:
State of
Probability of
Stock A
Stock B
Stock C
Economy
State of Economy
Rate of Return
Rate of Return
Rate of Return
Boom
.12
.09
.34
.53
Normal
.53
.17
.19
.27
Bust
.35
.18
−
.18
−
.37
a. If your portfolio is invested 36 percent
each in A and B and 28 percent in C, what is the portfolio’s
expected return, the variance, and the standard deviation?...
Consider the following information on a portfolio of three stocks: &
Consider the following information on a portfolio of three
stocks:
Rate of Return
State of
Economy
Probability of
State Occurring
Stock A
(%)
Stock B
(%)
Stock C
(%)
Boom
.15
7
15
28
Normal
.70
9
12
17
Bust
.15
10
2
−35
The portfolio is invested 40 percent in each of Stock A and
Stock B and the rest in Stock C.
Which of the three stocks has the lowest risk? Why?
What is the expected return...
Consider the following information on a portfolio of three stocks: &
Consider the following information on a portfolio of three
stocks:
Rate of Return
State of
Economy
Probability of
State Occurring
Stock A
(%)
Stock B
(%)
Stock C
(%)
Boom
.05
7
15
28
Normal
.80
9
12
17
Bust
.15
10
2
−35
The portfolio is invested 40 percent in each of Stock A and
Stock B and the rest in Stock C.
Which of the three stocks has the lowest risk? Why?
What is the expected return...
consider the following information about three stocks: state of economy. probability of state of &
consider the following information about three
stocks:
state of economy. probability of state
of
economy
boom.
0.20
normal.
0.55
bust.
0.25
rate of return if state occurs
stock
A.
Stock
B.
stock C
0.38.
0.50.
0.50
0.16.
0.14.
0.12
0.00.
-0.30.
-0.50
a-1. if your portfolio is invested 30%each in A and B
and 40% in C, what is the portfolio expected return?
a-2. what is the variance?
a-3. what is the standard deviation?
b. if the expected T-bill...
Consider the following information on three stocks: Rate of Return If State Occurs State of Economy...
Consider the following information on three stocks:
Rate of Return If State Occurs
State of Economy
Probability of State
of Economy
Stock A
Stock B
Stock C
Boom
.25
.35
.40
.52
Normal
.50
.17
.15
.13
Bust
.25
.01
?.32
?.40
a-1 If your portfolio is invested 35 percent each
in A and B and 30 percent in C, what is the portfolio expected
return? (Do not round intermediate calculations. Enter your
answer as a percent rounded to 2...
Consider the following information about three stocks: Rate of Return If State Occurs State of...
Consider the following
information about three stocks:
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.20
.38
.50
.50
Normal
.55
.16
.14
.12
Bust
.25
.00
?.30
?.50
a-1
If your portfolio is invested 30 percent each in A and B and 40
percent in C, what is the portfolio expected return? (Do
not round intermediate calculations. Enter your answer as a percent
rounded...
Consider the following information about three stocks: Rate of Return If State Occurs State of...
Consider the following information about three stocks:
Rate of Return If State Occurs
State of
Probability of
Economy
State of Economy
Stock A
Stock B
Stock C
Boom
.26
.32
.44
.56
Normal
.50
.13
.11
.09
Bust
.24
.04
−.25
−.45
a-1
If your portfolio is invested 40 percent each in A and B and 20
percent in C, what is the portfolio expected return? (Do
not round intermediate calculations. Enter your answer as a percent
rounded...
Consider the following information on three stocks: State of Economy Probability of State of Economy Rate...
Consider the following information on three stocks:
State of
Economy
Probability of
State of Economy
Rate of Return
if State Occurs
Stock A
Stock B
Stock C
Boom
.25
.27
.15
.11
Normal
.65
.14
.11
.09
Bust
.10
−.19
−.04
.05
A portfolio is invested 45 percent each in Stock A and Stock B
and 10 percent in Stock C. What is the expected risk premium on the
portfolio if the expected T-bill rate is 4.1 percent?
A.
8.71...
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