A what is the expected return on an equally weighted


Consider the following:

Rate of Return if State Occurs

State of the Econ. Probability of State of Econ. Stock A Stock B Stock C

Boom .56 .13 .21 .39

Bust .44 .15 .05 -.06

A. What is the expected return on an equally weighted portfolio of these three stocks?

Expected return 15.27%?

B. What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C?

Variance 11.45?

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