Security Returns If State Occurs

Security Returns If State Occurs
Security Returns If State Occurs
State of Probability of
Economy State of Economy Roll Ross
Bust .40 Acˆ’10 % 21 %
Boom .60 28 8

Calculate the volatility of a portfolio of 35 percent Roll and 65 percent Ross by filling in the following table: (Round your standard deviation answer to 2 decimal places. Round your intermediate calculations and other answers to 4 decimal places. Omit the “%” sign in your response.)

Calculating Portfolio Variance

State of
Economy Probability of
State of Economy Portfolio Return If
State Occurs Squared Deviation from Expected Return Product
Bust .40
Boom .60

A?A?p2 =
A?A? =