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31.2 Consider the following information on a portfolio of three stocks: State of Economy Probability of State Occurring Rate of Return in Percent Stock A
31.2 Consider the following information on a portfolio of three stocks:
State of Economy | Probability of State Occurring | Rate of Return in Percent | ||
Stock A | Stock B | Stock C | ||
Portfolio Weights | .5 | .3 | .2 | |
Boom | .1 | 6 | 15 | 25 |
Normal | .6 | 10 | 12 | 13 |
Bust | .3 | 8 | 2 | -19 |
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 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?
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