Consider the following information: Rate of Return if State Occurs Probability of State State of Economy of Economy Stock A Stock B Stock C Boom .25 .37 .47 .27 Good .50 .21 .18 .12 Poor .20 -.05 -.08 -.05 Bust .05 -15 -.33 -10 a. Your portfolio is invested 25 percent each in A and C, and 50 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-1. What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.). b-2. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected return b-1. Variance b-2. Standard deviation % %

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Question
Consider the following information:
Rate of Return if State Occurs
Probability of State
State of Economy
of Economy
Stock A
Stock B
Stock C
Boom
.25
.37
.47
.27
Good
.50
.21
.18
.12
Poor
.20
-.05
-.08
-.05
Bust
.05
-15
-.33
-10
a.
Your portfolio is invested 25 percent each in A and C, and 50 percent in B. What is
the expected return of the portfolio? (Do not round intermediate calculations and
enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b-1. What is the variance of this portfolio? (Do not round intermediate calculations and
round your answer to 5 decimal places, e.g., .16161.).
b-2. What is the standard deviation? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
a. Expected return
b-1. Variance
b-2. Standard deviation
%
%
Transcribed Image Text:Consider the following information: Rate of Return if State Occurs Probability of State State of Economy of Economy Stock A Stock B Stock C Boom .25 .37 .47 .27 Good .50 .21 .18 .12 Poor .20 -.05 -.08 -.05 Bust .05 -15 -.33 -10 a. Your portfolio is invested 25 percent each in A and C, and 50 percent in B. What is the expected return of the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-1. What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.). b-2. What is the standard deviation? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected return b-1. Variance b-2. Standard deviation % %
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