If your portfolio is invested 38 percent each in A and B and 24 percent in C, wh
ID: 2751997 • Letter: I
Question
If your portfolio is invested 38 percent each in A and B and 24 percent in C, what is the portfolio’s expected return, the variance, and the standard deviation? (Do not round intermediate calculations. Round your variance answer to 5 decimal places (e.g., 32.16161) and input your other answers as a percentage rounded to 2 decimal places (e.g., 32.16).)
If the expected T-bill rate is 4.3 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
Consider the following information on a portfolio of three stocks:Explanation / Answer
State of Probability of Stock A Stock B Stock C Economy State of Economy Rate of Return Rate of Return Rate of Return A Poportion B Poportion C Poportion Expected Return OF A Expected Return OF B Expected Return OF C Total Porfoloio Return Boom 0.12 0.03 0.33 0.49 38% 38% 24% 0.1368% 0.015048 0.014112 3.0528% Normal 0.54 0.11 0.23 0.21 38% 38% 24% 2.2572% 0.047196 0.027216 9.6984% Bust 0.34 0.17 -0.22 -0.36 38% 38% 24% 2.1964% -0.02842 -0.02938 -3.5836% Total Portfolio Return 9.1676% Secutity A Secutity B Secutity C Prbabilty Return Expected Retrurn Variance Prbabilty Return Expected Retrurn Variance Prbabilty Return Expected Retrurn Variance 0.12 3% 0.0036 0.000989357 0.12 33% 0.0396 0.00697 0.12 49% 0.0588 0.023253 0.54 11% 0.0594 6.29856E-05 0.54 23% 0.1242 0.010736 0.54 21% 0.1134 0.013859 0.34 17% 0.0578 0.000823018 0.34 -22% -0.0748 0.032464 0.34 -36% -0.1224 0.057098 1 Expected Return 0.1208 0.00187536 1 Expected Return 0.089 0.050169 1 Expected Return 0.0498 0.09421 SD 0.043305427 sd 0.223984 sd 0.306936 Secutity A Secutity B Prbabilty Return Variance Co variance Calulation AB Prbabilty Return 0.12 3% 0.0036 0.000989357 -0.0908 0.241 -0.00263 0.12 33% 0.0396 0.00697 0.54 11% 0.0594 6.29856E-05 -0.0108 0.141 -0.00082 0.54 23% 0.1242 0.010736 0.34 17% 0.0578 0.000823018 0.0492 -0.309 -0.00517 0.34 -22% -0.0748 0.032464 1 Expected Return 0.1208 0.00187536 Co Variance -0.00862 1 Expected Return 0.089 0.050169 SD 0.043305427 sd 0.223984 Correlation -0.8884 Secutity C Secutity B Prbabilty Return Variance Co variance Calulation BC Prbabilty Return 0.12 49% 0.0588 0.023253125 0.4402 0.241 0.012731 0.12 33% 0.0396 0.00697 0.54 21% 0.1134 0.013858582 0.1602 0.141 0.012198 0.54 23% 0.1242 0.010736 0.34 -36% -0.1224 0.057098254 -0.4098 -0.309 0.043054 0.34 -22% -0.0748 0.032464 1 Expected Return 0.0498 0.09420996 Co Variance 0.067982 1 Expected Return 0.089 0.050169 SD 0.30693641 sd 0.223984 Correlation 0.988841 Secutity C Secutity A Prbabilty Return Variance Co variance Calulation AC Prbabilty Return 0.12 49% 0.0588 0.023253125 0.4402 -0.0908 -0.0048 0.12 3% 0.0036 0.000989 0.54 21% 0.1134 0.013858582 0.1602 -0.0108 -0.00093 0.54 11% 0.0594 6.3E-05 0.34 -36% -0.1224 0.057098254 -0.4098 0.0492 -0.00686 0.34 17% 0.0578 0.000823 1 Expected Return 0.0498 0.09420996 Co Variance -0.01259 1 Expected Return 0.1208 0.001875 SD 0.30693641 sd 0.043305 Correlation -0.94687