Chapter 13
Question 5
Based on the following information, calculate the expected
return:
|
State of the Economy |
Probability of State of the Economy |
Portfolio Return if State Occurs |
|
Recession |
.25 |
-.08 |
|
Boom |
.75 |
.21 |
Question 7
Based on the following information, calculate the expected
return and standard deviation for the two stocks:
|
Rate of Return if State Occurs |
|||
|
State of the Economy |
Probability of State of Economy |
Stock A |
Stock B |
|
Recession |
.15 |
.05 |
-.17 |
|
Normal |
.65 |
.08 |
.12 |
|
Boom |
.20 |
.13 |
.29 |
Question 11
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 |
.15 |
.30 |
.45 |
.33 |
|
Good |
.45 |
.12 |
.10 |
.15 |
|
Poor |
.35 |
.01 |
-.15 |
-.05 |
|
Bust |
.05 |
-.06 |
-.30 |
-.09 |
a.) Your
portfolio is invested 30 percent each in A and C, and 40 percent in B. What is the expected return of the portfolio?
b.) What
is the variance of this portfolio? The
standard deviation?
