Question: The table below shows the forecasted rate of return based on the prevailing economic conditions. Calculate the expected return of the portfolio State of economy

The table below shows the forecasted rate of return based on the prevailing economic conditions.

  1. Calculate the expected return of the portfolio
State of economy Probability of the economic state Rate of Return
Boom 0.50 25%
Normal 0.20 12%
Recession 0.30 - 6%

Required:

Based on the information given:

  1. Calculate the expected return of the portfolio .

2. Calculate the portfolio risk (the variance and standard deviation)

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