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James owns a two-stock portfolio that invests in Blue Llama Mining Company (BLM) and Hungry Whale Electronics (HWE). Three- quarters of James's portfolio value consists
James owns a two-stock portfolio that invests in Blue Llama Mining Company (BLM) and Hungry Whale Electronics (HWE). Three- quarters of James's portfolio value consists of BLM's shares, and the balance consists of HWE's shares. Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Probability of Occurrence Blue Llama Mining Hungry Whale Electronics Market Condition Strong Normal 25% 32.5% 45.5% 45% 19.5% 26% Weak 30% -26% -32.5% Calculate expected returns for the individual stocks in James's portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year. The expected rate of return on Blue Llama Mining's stock over the next year is . The expected rate of return on Hungry Whale Electronics's stock over the next year is The expected rate of return on James's portfolio over the next year is PROBABILITY DENSITY Company G Company H -40 -20 0 20 40 60 RATE OF RETURN (Percent) Based on the graph's information, which company's returns exhibit the greater risk? Company H Company G
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