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Consider the following information about three s...

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Consider the following information about three stocks: Rate of Return if State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom 0.20 0.34 0.46 0.50 Normal 0.40 0.25 0.23 0.20 Bust 0.40 0.03 ? 0.25 ? 0.42 a-1 If your portfolio is invested 35 percent each in A and B and 30 percent in C, what is the portfolio expected return? (Round your answer to 2 decimal places. (e.g., 32.16)) Portfolio expected return % a-2 What is the variance? (Do not round intermediate calculations and round your final answer to 5 decimal places. (e.g., 32.16161)) Variance a-3 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 % b. If the expected T-bill rate is 4.50 percent, what is the expected risk premium on the portfolio? (Round your answer to 2 decimal places. (e.g., 32.16)) Expected risk premium % c-1 If the expected inflation rate is 4.00 percent, what are the approximate and exact expected real returns on the portfolio? (Round your answers to 2 decimal places. (e.g., 32.16)) Approximate expected real return % Exact expected real return % c-2 What are the approximate and exact expected real risk premiums on the portfolio? (Round your answers to 2 decimal places. (e.g., 32.16)) Approximate expected real risk premium % Exact expected real risk premium %

 

Paper#10127 | Written in 18-Jul-2015

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