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 .20 .38 .50 .54 Normal .50 .21 .16 .13 Bust .30 .05 −.28 −.45
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? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Portfolio expected return 11.36 %
a-2 What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.)
Variance
a-3 What is the standard deviation? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Standard deviation %
b. If the expected T-bill rate is 4.70 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected risk premium 6.6 %
c-1 If the expected inflation rate is 4.20 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Approximate expected real return 7.16 %
Exact expected real return 6.87 %
c-2 What are the approximate and exact expected real risk premiums on the portfolio?
Approximate expected real risk premium %
Exact expected real risk premium