# Rate of Return if State Occurs

Rate of Return if State Occurs

Problem 13-9 Returns and Variances [LO1]

Consider the following information:

Rate of Return if State Occurs

State of Probability of

Economy State of Economy Stock A Stock B Stock C

Boom 0.70 0.14 0.21 0.39

Bust 0.30 0.12 0.02 -0.07

a.

What is the expected return on an equally weighted portfolio of these three stocks? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Expected return %

b.

What is the variance of a portfolio invested 25 percent each in A and B and 50 percent in C? (Do not round intermediate calculations and round your answer to 6 decimal places. (e.g., 32.161616))

Variance