Returns and Standard Deviations Consider the following information:
|
Rate of Return If State Occurs |
||||
|
State of Economy |
Probability of State of Economy |
Stock A |
Stock B |
Stock C |
|
Boom |
0.2 |
0.18 |
0.48 |
0.33 |
|
Good |
0.4 |
0.11 |
0.18 |
0.15 |
|
Poor |
0.3 |
0.05 |
.09 |
.05 |
|
Bust |
0.1 |
.03 |
.32 |
.09 |
a. Your portfolio is invested 25 percent each in A and C, and 50 percent in B. What is the expected return of the portfolio?
b. What is the variance of this portfolio? The standard deviation?