Answer:
Expected Return Boom = 0.29(0.353) + 0.42(0.453) + 0.29(0.333)
Expected Return Boom = 0.3892
Expected Return Boom = 38.92%
Expected Return Good= 0.29(0.123) + 0.42(0.103) + 0.29(0.173)
Expected Return Good = 0.1291
Expected Return Good = 12.91%
Expected Return Poor = 0.29(0.013) + 0.42(0.023) + 0.29(-0.053)
Expected Return Poor = - 0.00194
Expected Return Poor = - 0.194%
Expected Return Bust = 0.29(-0.113) + 0.42(-0.253) + 0.29(-0.093)
Expected Return Bust= - 0.166
Expected Return Bust= - 16.6%
a. Expected return portfolio = 0.3892*0.18 + 0.1291*0.42 + 0.32*- 0.00194 + 0.08*- 0.166
Expected return portfolio = 0.1104
Expected return portfolio = 11.04%
b. Variance = 0.18*(0.3892-0.1104)^2 + 0.42*(0.1291-0.1104)^2 + 0.32*(- 0.00194-0.1104)^2 + 0.08*(- 0.166-0.1104)^2
Variance = 0.02429
c. Standard Deviation = (0.02429)^(0.5)
Standard Deviation = 0.1558
Standard Deviation = 15.58%
