Consider the following information: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom. 55.15.22.42 Bust. 45.14.04 -.05 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 percent rounded to 2 decimal places, e. g., 32.16.) Expected return % b. What is the variance of a portfolio invested 24 percent each in A and B and 52 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e. g., 32.161616.) Variance

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Business

Belinda Russell

1 June, 06:24

Consider the following information: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom. 55.15.22.42 Bust. 45.14.04 -.05 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 percent rounded to 2 decimal places, e. g., 32.16.) Expected return % b. What is the variance of a portfolio invested 24 percent each in A and B and 52 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places, e. g., 32.161616.) Variance

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Keira Rosario · Answer 1

The variance is 0.02081475

State Return

Boom = (24%*0.15+24%*0.22+52%*0.42) = 0.3072

Bust = (24%*0.14+24%*0.04-52%*0.05) = 0.0172

Variance=0.55 * (0.3072 - (0.55*0.3072+0.45*0.0172)) ^2+0.45 * (0.0172 - (0.55*0.3072+0.45*0.0172)) ^2=0.02081475