Returns and Standard Deviations [LO 1, 2]
| Consider the following information: |
|
|
Rate of Return if State Occurs |
| State of |
Probability of State |
|
| Economy |
of Economy |
Stock A |
Stock B |
Stock C |
| Boom |
.72 |
.10 |
.04 |
.40 |
| Bust |
.28 |
.29 |
.35 |
-.20 |
|
| (a) |
What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
|
| (b) |
What is the variance of a portfolio invested 27 percent each in A and B and 46 percent in C? (Do not round intermediate calculations. Round your answer to 5 decimal places (e.g., 32.16161).)
|