A portfolio consists of $18,740 of Stock K and $31,910 of Stock L. Stock K is expected to return 17 percent in a booming economy, lose 6 percent in a recession, and gain 9 percent in a normal economy. Stock L is expected to return 4 percent in a booming economy, 13 percent in a recession, and 10 percent in a normal economy. The probability of the economy booming is 16 percent. What is the expected rate of return on the portfolio if the economy enters a recession?

Select one:

a. 5.97%

b. 0.74%

c. 4.59%

d. 2.62%.

e. 3.71%