# 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.

$2.49