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. 4. 34. 48 Normal. 53. 12. 24. 22 Bust. 32. 18 –. 23 –. 37 a. If your portfolio is invested 36 percent each in A and B and 28 percent in C, what is the portfolio’s 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. Enter your other answers as a percent rounded to 2 decimal places, e. G. , 32. 16. ) b. If the expected T-bill rate is 4. 35 percent, what is the expected risk premium on the portfolio?

Question

contestada

Respuesta :

topeadeniran2 topeadeniran2 · Answer 1 · 2022-12-05T16:56:37+01:00

1. The expected return on the portfolio is 0.1031.

b. The variance is 0.02451.

c. The standard deviation is 0.1566.

The expected return will be calculated thus:

= Portfolio × Return in stock

Boom = 0.2712

Normal = 0.1912

Brust = -0.1216

The expected return will be calculated thus:

= Portfolio × Return on stock

= (0.15 × 0.2712) + (0.53 × 0.1912) + (0.32 × -0.1216)

= 0.1031

The variance will be:

= Probability × (Returned stock - Expected Return)²

= 0.15(0.2712 - 0.1031)² + 0.53(0.1912 - 0.1031)² + 0.32(-0.1216 - 0.1031)²

= 0.02451

The standard deviation will be the square root of the variance. This will be:

= ✓0.02451

= 0.1566

Learn more about portfolio on:

brainly.com/question/25929259

#SPJ1