Rate of Return if State Occurs
Problem 13-9 Returns and Variances [LO1]
| Consider the following information: |
| Rate of Return if State Occurs | ||||||||||||
| State of | Probability of | |||||||||||
| Economy | State of Economy | Stock A | Stock B | Stock C | ||||||||
| Boom | 0.70 | 0.14 | 0.21 | 0.39 | ||||||||
| Bust | 0.30 | 0.12 | 0.02 | -0.07 | ||||||||
| a. | What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Expected return | % |
| b. | What is the variance of a portfolio invested 25 percent each in A and B and 50 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places. (e.g., 32.161616)) |
| Variance |
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Jermaine Byrant
Nicole Johnson



