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A What is the expected return of an equally weighted portfolio comprised of the following three stocks? Rate of Return if State State of
A What is the expected return of an equally weighted portfolio comprised of the following three stocks? Rate of Return if State State of Probability of Occurs Economy State of Economy Stock A Stock B Stock C Boom .25 19 13 .07 Normal .72 .15 .05 .13 Bust .03 -.29 -.14 .22 35. 10.96% E (Rp) Boom (.19.13 + .07)/3 .13, or 13% E (Rp) Boom E (Rp) Normal (.15 + .05.13)/3 E (Rp) Normal .11, or 11% E (Rp) Bust = (-.29 .14 + .22)/3 E (RP) Bust = .07, or -7% E (Rp) Bo Boom E (Rp) Boom .25 (.13) + .72 (.11) + .03 (-.07) .1096, or 10.96% I
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Financial Management Theory and Practice
Authors: Eugene Brigham, Michael Ehrhardt, Jerome Gessaroli, Richard Nason
2nd Canadian edition
176517308, 978-0176517304
