You have a portfolio which is comprised of 70 percent of stock A and 30 percent of
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Question:
You have a portfolio which is comprised of 70 percent of stock A and 30 percent
of stock B. What is the expected return on this portfolio?
State of the Economy Probability E(R) A E(R) B
Weight 70 % 30 %
Boom 0.2 20 % 14 %
Normal 0.6 12 % 8 %
Recession 0.2 -8 % 5 %
A) 11.79 percent
B) 9.30 percent
C) 9.58 percent
D) 12.40 percent
E) 10.03 percent
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