Answer Happy

Consider the following information on three stocks: State of Economy Boom Normal Bust 1.67% 5.55% 8.75% A portfolio is invested 45 percent each in Stock A and Stock B, and 10 percent in Stock C. The expected T-bill rate is 3.2 percent. What is the expected risk premium on the portfolio? 4.29% 12.38% Rate of Return if State Occurs Stock A Stock B Stock C .27 .15 .14 .11 -.19 -.06 Probability of State of Economy .15 .65 .20 .11 .09 .05

You recently purchased a stock that is expected to earn 12 percent in a booming economy, 6.5 percent in a normal economy, and lose 1.5 percent in a recessionary economy. The probability of a booming economy is 14 percent while the probability of a normal economy is 65 percent. What is your expected rate of return on this stock? -2.24% 5.59% 0.35% 5.67% 6.22%

If the economy is normal, Taeana Wear stock is expected to return 9.3 percent. If the economy falls into a recession, the stock's return is projected at a negative 6.3 percent. The probability of a normal economy is 74 percent. What is the variance of the returns on this stock? 0.031962 0.004682 0.007432 0.006084 0.001802

The rate of return on the common stock of Kang Distribution is expected to be 13.5 percent in a boom economy, 8 percent in a normal economy, and only 2.5 percent in a recessionary economy. The probabilities of these economic states are 11 percent for a boom and 26 percent for a recession. What is the variance of the returns on this common stock? .001585 0.001051 0.006199 0.001119 002232