I have the expected return calculation right, but my other answers are wrong. Ca
ID: 2645609 • Letter: I
Question
I have the expected return calculation right, but my other answers are wrong. Can someone please let me know the variance and standard deveation? As well as the expected risk premium in question b at the bottom.
Explanation / Answer
State of Economy Probability Staock A Return Staock B Return Staock C Return Boon 0.13 0.02 0.32 0.5 Normal 0.55 0.1 0.22 0.2 Worst 0.32 0.16 -0.21 -0.35 10.88% 9.54% 6.30% Weights 0.4 0.4 0.2 Expected Return {E} 9.43% Variance = Wa*(Ra - E)^2 + Wb*(Rb - E)^2 + Wc*(Rc - E)^2 0.0002805 Standard Deviation = Square root of Variance 1.67% Market Risk Premium = Expected market return