9. value: 6.25 points

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 | 0.56 | 0.06 | 0.14 | 0.34 | ||||||||

Bust | 0.44 | 0.15 | 0.05 | − | 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 | % |

b. | What is the variance of a portfolio invested 22 percent each in A and B and 56 percent in C?(Do not round intermediate calculations and round your answer to 6 decimal places. (e.g., 32.161616)) |

Variance |

10. value: 6.25 points

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 | 0.15 | 0.33 | 0.43 | 0.23 | ||||||||

Good | 0.55 | 0.18 | 0.14 | 0.12 | ||||||||

Poor | 0.25 | − | 0.05 | − | 0.08 | − | 0.06 | |||||

Bust | 0.05 | − | 0.13 | − | 0.18 | − | 0.10 | |||||

a. | Your portfolio is invested 26 percent each in A and C, and 48 percent in B. What is the expected return of the portfolio? (Round your answer to 2 decimal places. (e.g., 32.16)) |

Expected return | % |

b–1 | What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places. (e.g., 32.16161)) |

Variance |

b–2 | What is the standard deviation? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |

Standard deviation | % |

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