What is the expected risk premium on the portfolio

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Reference no: EM131906304

Consider the following information on a portfolio of three stocks: State of Economy Probability of State of Economy Stock A Rate of Return Stock B Rate of Return Stock C Rate of Return Boom 0.15 0.10 0.35 0.52 Normal 0.52 0.18 0.20 0.28 Bust 0.33 0.19 –0.19 –0.38 Required: (a) If your portfolio is invested 42 percent each in A and B and 16 percent in C, what is the portfolio’s expected return, the variance and the standard deviation? (Do not include the percent signs (%). Round your variance answer to 5 decimal places (e.g., 32.16161) and the other answers to 2 decimal places (e.g., 32.16).) Expected return % Variance Standard deviation % (b) If the expected T-bill rate is 4.15 percent, what is the expected risk premium on the portfolio? (Do not include the percent sign (%). Round your answer to 2 decimal places (e.g., 32.16).) Expected risk premium %

Reference no: EM131906304

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