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Returns and Variances [LO1]
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 .56 .13 .21 .39
Bust .44 .15 .05 -.06
a. What is the expected return on an equally weighted portfolio of these three stocks?
Expected Return %
b. What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C?
Variance
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