Question: Consider Stock A and Stock B below. Expected Return E(R) Stock A Stock B State (i) p(i) E(Ra) E(Rb) Recession 0.25 -25% 25% Neutral 0.50

Consider Stock A and Stock B below.

Expected Return
E(R)
Stock A Stock B
State (i) p(i) E(Ra) E(Rb)
Recession 0.25 -25% 25%
Neutral 0.50 15% 15%
Boom 0.25 35% -10%

What is the Expected return for a portfolio comprised of 40% of stock A and 60% of stock B?

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