FIN 308 Fall 2019 In Class Activity 1. There are two expected states of the economy. The probability of a boom is 60%, the probability of a bust is 40%. If the economy booms, Security A is expected to earn 15% and Security B is expected to earn 8%. If the economy goes bust, Security A is expected to earn 5% and Security B is expected to earn 20%. What is the expected return on a portfolio that equally split among A, B, and the risk-free asset? The expected return on the risk-free asset is 4%