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Consider the following information:    Rate of Return if State Occurs State of Economy Probability of State of Economy Stock A Stock...

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Question

Finance

Consider the following information:

  

Rate of Return if State Occurs
State of EconomyProbability of
State of Economy		Stock AStock BStock C
Boom0.640.150.050.23
Bust0.360.070.07-0.09

  

Requirement 1:

What is the expected return on an equally weighted portfolio ofthese three stocks? (Do not round your intermediatecalculations.)

(Click to select)9.77%12.27%21.80%24.57%4.04%

  

Requirement 2:

What is the variance of a portfolio invested 20 percent each inA and B and 60 percent in C? (Do not round yourintermediate calculations.)

Answer & Explanation Solved by verified expert
4.4 Ratings (932 Votes)
1 Stock A Scenario Probability Return rate of return probability Boom 064 15 96 Bust 034 7 238 Expected return sum of weighted return 1198 Share B Scenario Probability Return rate of return probability Boom 064 5 32 Bust 034 7 238 Expected return sum of weighted return 558 Share C Scenario Probability Return rate of return probability Boom 064 23 1472 Bust 034 9 306 Expected return sum of weighted return 1166 Expected return Wt Stock AReturn Stock AWt Share BReturn Share BWt Share    See Answer
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Transcribed Image Text

Consider the following information:  Rate of Return if State OccursState of EconomyProbability ofState of EconomyStock AStock BStock CBoom0.640.150.050.23Bust0.360.070.07-0.09  Requirement 1:What is the expected return on an equally weighted portfolio ofthese three stocks? (Do not round your intermediatecalculations.)(Click to select)9.77%12.27%21.80%24.57%4.04%  Requirement 2:What is the variance of a portfolio invested 20 percent each inA and B and 60 percent in C? (Do not round yourintermediate calculations.)

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