Question

Expected return and standard

deviation.

Use the following information to answer the questions.

State of   Economy		Probability of State		Return on Asset J in State		Return on Asset K in State		Return on Asset L in State
Boom		0.25		0.065		0.230		0.260
Growth		0.36		0.065		0.140		0.210
Stagnant		0.23		0.065		0.065		0.055
Recession		0.16		0.065		-0.080		−0.210

a. What is the expected return of asset J?

_____

(Round to four decimal places.)

What is the expected return of asset K?

________

(Round to four decimal places.)

What is the expected return of asset L?

_______

(Round to four decimal places.)

b. What is the variance of asset J?

______

(Round to four decimal places.)

What is the variance of asset K?

_______

(Round to four decimal places.)

What is the variance of asset L?

_________

(Round to four decimal places.)

What is the standard deviation of asset J?

_______

(Round to four decimal places.)

What is the standard deviation of asset K?

_______

(Round to four decimal places.)

What is the standard deviation of asset L?

________

(Round to four decimal places.)

c. What is the expected return of a portfolio with

11 % in asset J, 52 % in asset K, and 37 % in asset L? _____

(Round to four decimal places.)

d. What is the portfolio's variance using the same asset weights from part

(c )?______

(Round to four decimal places.)

What is the portfolio's standard using the same asset weights from part

(c )? ______

(Round to four decimal places.)

Answer 1