Consider the following information:
State of Economy Probability of State of Economy Rate of Return If State Occurs
Stock A Stock B Stock C
Boom .75 .06 .19 .25
Bust .25 .11 -.09 -.21
What is the expected return on an equally weighted portfolio of these three stocks?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
What is the variance of a portfolio invested 20 percent each in A and B and 60 percent in C?You are evaluating two different silicon wafer milling machines. The Techron I costs $246,000, has a three-year life, and has pretax operating costs of $65,000 per year. The Techron II costs $430,000, has a five-year life, and has pretax operating costs of $38,000 per year. For both milling machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of $42,000. If your tax rate is 21 percent and your discount rate is 10 percent, compute the EAC for both machines.