Consider the Following Information on Three Stocks A Portfolio Is Invested 45 Percent Each in Stock a ccccc

Multiple Choice

Consider the following information on three stocks: $$\begin{array} { l ccccc } { \text { State of } } & { \text { Probability of } } &&\text { Rate of Return }\\\text { Economy } & \text { State of Economy } & &{ \text { if State Occurs } } \\& & \text { Stock A } & \text { Stock B } & \text { Stock C } \\\text { Boom } & .25 & .27 & .15 & .11 \\\text { Normal } & .65 & .14 & .11 & .09 \\\text { Bust } & .10 & - .19 & - .04 & .05\end{array}$$
A portfolio is invested 45 percent each in Stock A and Stock B and 10 percent in Stock C. What is the expected risk premium on the portfolio if the expected T-bill rate is 3.2 percent?

A) 11.47 percent
B) 12.38 percent
C) 1.67 percent
D) 4.29 percent
E) 8.71 percent