Suppose we have the following projections for three shares:

We want to calculate portfolio expected returns in two cases. First, what would be the expected return on a portfolio with equal amounts invested in each of the three shares? Second, what would be the expected return if half of the portfolio were in A, with the remainder equally divided between B and C?

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Returns if state occurs State of Probability of economy state of economy Share A Share B Share C Boom 0.40 10% 15% 20% Bust 0.60 8 4 0