Question

PLEASE add calculations and how to get the answers

L01 10. Returns and Standard Deviations. Consider the following information: LO 2 State of Economy Probability of State of Economy Rate of Return If State Occurs Stock A Stock B Stock C Boom . 15 .35 .45 33 Good Poor .50 .25 .10 .12 .01 -.11 .10 .02 -25 .17 -.05 Bust -.09 a. Your portfolio is invested 25 percent each in A and Cand 50 percent in B. What is the expected return of the portfolio? b. What is the variance of this portfolio? The standard deviation? .. . Datae You own a stock portfolio invested 15 nercent

Answer 1

0.25 0.5 0.25 Weight Rate of Return If State Occurs State of Return*weight Probability B Economy Boom Good Poor Bust Stock A 0.15 0.35 0.51 0.12 0.25 0.01 0.1 -0.11 Stock B 0.45 0.11 0.02 -0.25 Stock C 0.33 0.17 -0.05 -0.09 A 0.0875 0.03 0.0025 -0.0275 0.225 0.05 0.01 -0.125 0.0825 0.0425 -0.0125 -0.0225 TOTAL 0.395 0.1225 0 -0.175 Total*probability Total-Expected return d2*probability Expected Portfolio Deviatio Return Deviation n^2 VARIANCE 0.05925 0.292 0.085264 0.0127896 0.06125 0.0195 0.00038 0.000190125 0.00000 -0.103 0.010609 0.00265225 -0.01750 -0.278 0.077284 0.0077284 0.10300 0.023360375 10.30% Expected return variance standard deviation(variance^(1/2)) 0.103 0.02336 15.28%! 0.02336^(1/2)