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1. Consider the following information on a portfolio of three stocks: Probability of Economy State Occurring Stock A Stock B .10 .70 State of Rate

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1. Consider the following information on a portfolio of three stocks: Probability of Economy State Occurring Stock A Stock B .10 .70 State of Rate of Return in Percent Stock C Boom Normal Bust a. What is the expected return on Stock A b. What is the expected return on Stock B c. What is the expected return on Stock C The portfolio is invested 40 percent each in Stock A and Stock B, and 20 percent in Stock C. d. What is the expected return on the portfoiio in a boom? e. What is the expected return on the portfoiio in a normal economy? f. What is the expected return on the portfoiio in a bust? g. What is the overall expected return on the portfolio? 13 23 12 15 .20 -26

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