Sunday, 15 June 2014
Basic Finance Question
Rate of Return if State Occurs State of Economy Probability of State of
Economy Stock A Stock B Stock C Boom 0.65 0.07 0.15 0.33 Bust 0.35 0.13
0.03 -0.06 a. What is the expected return on an equally weighted
portfolio of these three stocks? b. What is the variance of a portfolio
invested 20 percent each in A and B, and 60 percent in C?
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