a) You have invested in an equally weighted portfolio of stock A and stock B. The expected returns of the stocks are below:

	Return in a Boom Period	Return in a Recession
Stock A	40%	-25%
Stock B	10%	-15%

What is the expected return of the portfolio if there is a 30% chance of recession? 

B) You purchase 1,000 shares of Amazon and 500 shares of Tesla. The price of Amazon is

	Return in a Boom Period	Return in a Recession
Amazon	40%	-10%
Tesla	50%	-35%

What is the expected return of the portfolio if there is a 60% chance of recession?

Answer rating: 100% (QA)

a To calculate the expected return of the portfolio when there is a 30 chance of a recession you can ... View the full answer