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    Expected Return & Standard Deviation of return

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    A portfolio is invested 40% in stock R, 35% in Stock S, and 25% in Stock T.
    State of Probability of Rate of Return if state occurs
    Economy State of Economy Stock R Stock S Stock T
    Boom 0.25 0.3 0.4 0.25
    Good 0.4 0.1 0.15 0.1
    Poor 0.25 0 -0.05 -0.1
    Bust 0.1 -0.25 -0.15 -0.2

    What is the expected return of the portfolio? What is the standard deviation of the return?

    Please see attached spreadsheet.

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    Solution Summary

    The solution calculates Expected Return & Standard Deviation of return of a portfolio that has 3 stocks. The probability distribution of return of these stocks is given.


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