Security Returns If State Occurs
| Security Returns If State Occurs | |||||||||||
| State of | Probability of | ||||||||||
| Economy | State of Economy | Roll | Ross | ||||||||
| Bust | .40 | Acˆ’10 | % | 21 | % | ||||||
| Boom | .60 | 28 | 8 | ||||||||
| Calculate the volatility of a portfolio of 35 percent Roll and 65 percent Ross by filling in the following table: (Round your standard deviation answer to 2 decimal places. Round your intermediate calculations and other answers to 4 decimal places. Omit the “%” sign in your response.) |
| Calculating Portfolio Variance | |||||
| State of Economy |
Probability of State of Economy |
Portfolio Return If State Occurs |
Squared Deviation from Expected Return | Product | |
| Bust | .40 | ||||
| Boom | .60 | ||||
| A?A?p2 = | |||||
| A?A? = | |||||
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