Question
1) Megan Fox would like to invest in stock A. Before investing, she would like to know what the expected return of the stock is.
1) Megan Fox would like to invest in stock A. Before investing, she would like to know what the expected return of the stock is.
STOCK A has the following returns for various states of the economy:
State of
the Economy Probability STOCK A's Return
Recession 9% -72%
Below Average 16% -15%
Average 51% 16%
Above Average 14% 35%
Boom 10% 85%
STOCK A's expected return is
A) 9.9%.
B) 12.7%.
C) 13.8%.
D) 16.5%.
2) James Hetfield of Metallica is investing in stocks. Assume that he has $330,000 invested in a STOCK A that is returning 11.50%, $170,000 invested in a STOCK B that is returning 22.75%, and $470,000 invested in a STOCK C that is returning 10.25%. What is the expected return of James's portfolio?
A) 15.6%
B) 12.9%
C) 18.3%
D) 14.8%
Please provide detail step by step calculations.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started