Consider the following information on a portfolio of three stocks: ...
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Accounting
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
.02
.32
.60
Normal
.55
.10
.12
.20
Bust
.30
.16
.11
.35
Required:
(a)
If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolios 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) and input your other answers as a percentage rounded to 2 decimal places (e.g., 32.16).)
Expected return
%
Variance
Standard deviation
%
(b)
If the expected T-bill rate is 3.75 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
Expected risk premium
%
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