You have decided to invest $120.000 on stock A and $70,000 on stock B. You believe that the probabilities of having a boom next year is 30%, of having a stable economy is 45%, and of having a recession is 25%, For boom, the Stock A price next year is $40 and the dividend next year is $3. For stable, the Stock A price next year is $33 and the dividend next year is $2. For recession, the Stock A price next year is $25 and the dividend next year is $0. For boom, the Stock B price next year is $16 and the dividend next year is $0. For stable, the Stock B price next year is $15 and the dividend next year is $0. For recession, the Stock B price next year is $9 and the dividend next year is $0. Stock A's current price is $30, and stock B's current price is $12. What is the expected rate of return of your portfolio over the following year?

Answer rating: 100% (QA)

To calculate the expected rate of return of your portfolio you need to consider the weighted average ... View the full answer