Comparing Stocks


State of Economy 





Stock A 
Stock B 
Stock C 

Boom 
.2 
.24 
.36  .58 
 
Normal 
.5 
.20 
.18  .16 
 
Bust 
.3 
.04 
.36  .45 
 

a1 
If your portfolio is invested 40 percent each in A and B and 20 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 
% 
a2 
What is the variance? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.) 
Variance 

a3 
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 
% 
b. 
If the expected Tbill rate is 4.00 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 
% 
c1 
If the expected inflation rate is 3.60 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 
% 

c2 
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 
% 