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Consider the following information about three stocks: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .26 .26 .38 .55 Normal .50 .21 .19 .17 Bust .24 .05 −.38 −.46

a-1 If your portfolio is invested 35 percent each in A and B and 30 percent in C, what is the portfolio expected return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Portfolio expected return 13.58 %

a-2 What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.) Variance .05457

a-3 What is the standard deviation? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Standard deviation 23.36 %

b. If the expected T-bill rate is 4.10 percent, what is the expected risk premium on the portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected risk premium 9.48 %

c-1 If the expected inflation rate is 3.70 percent, what are the approximate and exact expected real returns on the portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Approximate expected real return % Exact expected real return %

c-2 What are the approximate and exact expected real risk premiums on the portfolio? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Approximate expected real risk premium % Exact expected real risk premium %.

All the answers are correct I just need approximate and exact returns, C-1, and what are the ecpected and exact real premiums, C-2.

Financial Management, Finance

  • Category:- Financial Management
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