Portfolio expected return-variance and standard deviation

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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 .12 .09 .34 .53 Normal .53 .17 .19 .27 Bust .35 .18 –.18 –.37 Required: (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) and input your other answers as a percentage rounded to 2 decimal places (e.g., 32.16).) Expected return 9.65 % Variance 0.01101 Standard deviation 10.49 % (b) If the expected T-bill rate is 4.1 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Expected risk premium 5.55 %

Reference no: EM131070704

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