Portfolio Returns and Deviations Consider the following information about three stocks:
Rate of Return if State Occurs
State of Probability of
Economy State of Economy Stock A Stock B Stock C
Boom .30 .20 .25 .60
Normal .45 .15 .11 .05
Bust .25 .01 − .15 − .50
a-1.
If your portfolio is invested 40 percent each in A and B and 20 percent in C , what is the portfolio expected return? (Do not round intermediate calculations and round your answer to 2 decimal places. (e. g., 32.16))
Portfolio expected return ? %
a-2.
What is the variance? (Do not round intermediate calculations and round your final answer to 5 decimal places. (e. g., 32.16161))
Variance ?
a-3.
What is the standard deviation? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e. g., 32.16))
Standard deviation ? %
b.
If the expected T-bill rate is 3.80 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e. g., 32.16))
Expected risk premium ? %
c-1.
If the expected inflation rate is 3.50 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations and round your answers to 2 decimal places. (e. g., 32.16))
Approximate expected real return ? %
Exact expected real return ?%
c-2.
What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations and round your answers to 2 decimal places. (e. g., 32.16))
Approximate expected real risk premium ?%
Exact expected real risk premium ? %