Problem:
Consider the following information: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .17 .358 .458 .338 Good .43 .128 .108 .178 Poor .33 .018 .028? 062 Bust .07? 118? 258? 098
Required:
Question: Your portfolio is invested 29 percent each in A and C and 42 percent in B. What are the expected return and the variance of the portfolio?
Note: Provide support for your underlying principle.