Expected return and Variance on a portfolio of 3 assets
| Consider the following information: |
| Rate of Return if State Occurs | ||||
| State of | Probability of State | |||
| Economy | of Economy | Stock A | Stock B | Stock C |
| Boom | .60 | .18 | .04 | .31 |
| Bust | .40 | .03 | .16 | –.11 |
| a. | What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| b. | What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., .16161.) |
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