Consider the following information on a portfolio of three stocks: State of Probability of Economy State of Economy Boom .12 Normal Bust .33 Stock A Rate of Return .07 .16 Stock B Rate of Return .32 .27 -.26 Stock Rate of Return .45 .25 -.35 a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance, and the standard deviation ? Note: Do not round intermediate calculations . Round your variance answer to 5 decimal places, e.g., .16161. Enter your other answers as a percent rounded to 2 decimal places , e.g., 32.16. bIf the expected T-bill rate is 4.5 percent, what is the expected risk premium on the portfolio ? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16 . % a. Expected return Variance Standard deviation % b. Expected risk premium % Homework 1Problem 11-25 Portfolio Returns and Deviations [LO 1, 2]Consider the following information on a portfolio of three stocks:State of Probability of Stock A Rate ofEconomy State of EconomyBoomNormalBust.12.55.33Return.07.15.16a. Expected returnVarianceStandard deviationb. Expected risk premiumLa. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance,and the standard deviation?Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., .16161. Enter your otheranswers as a percent rounded to 2 decimal places, e.g., 32.16.%Stock B Rate of Stock C Rate ofReturnReturn.32.27-.26b. If the expected T-bill rate is 4.5 percent, what is the expected risk premium on the portfolio?Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.%%.45.25-.35QSaved< Prev17 of 19THMacBook ProNext >

The expected return on the portfolio can be found by adding the portfolio returns after multiplying…

Consider the following information on a portfolio of three stocks: Stock A Rate of Return. .07 .15 State of Probability of Economy State of Economy Boom Normal Bust .12 .55 .33 .16 a. Expected return Variance Standard deviation b. Expected risk premium Stock B Rate of Return % .32 .27 -.26 a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance, and the standard deviation? % % Stock C Rate of Return Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., .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 4.5 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. .45 .25 -.35

Consider the following information on a portfolio of three stocks: Stock A Rate of Return. .07 .15 State of Probability of Economy State of Economy Boom Normal Bust .12 .55 .33 .16 a. Expected return Variance Standard deviation b. Expected risk premium Stock B Rate of Return % .32 .27 -.26 a. If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance, and the standard deviation? % % Stock C Rate of Return Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., .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 4.5 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. .45 .25 -.35

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 16P

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