Question
Please show work and formula. I am studying for a test. Thank you I will upvote. There is a 20 percent probability the economy will
Please show work and formula. I am studying for a test. Thank you I will upvote.
There is a 20 percent probability the economy will boom, 70 percent probability it will be normal, and a 10 percent probability of a recession. Stock A will return 18 percent in a boom, 11 percent in a normal economy, and lose 10 percent in a recession. Stock B will return 9 percent in boom, 7 percent in a normal economy, and 4 percent in a recession. What is the expected return and variance of a portfolio which is invested 40 percent in Stock A and 60 percent in Stock B?
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