# Financial planning

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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