Returns and Standard Deviations Consider the following information:
State of Economy | Probability of State of Economy | .Rate of Return if State Occurs | ||
Stock A | Stock B | Stock C | ||
Boom | .20 | .30 | .45 | .33 |
Good | .35 | .12 | .10 | .15 |
Poor | .30 | .01 | –.15 | –.05 |
Bust | .15 | –.06 | –.30 | –.09 |
a. Your portfolio is invested 30 percent each in A and C, and 40 percent in B. What is the expected return of the portfolio?
b.What is the variance of this portfolio? The standard deviation?
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