Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Q2) There is a 10.80% probability of an average economy and a 89.20% probability of an above average economy. You invest 38.10% of your money
Q2) There is a 10.80% probability of an average economy and a 89.20% probability of an above average economy. You invest 38.10% of your money in Stock S and 61.90% of your money in Stock T. In an average economy the expected returns for Stock S and Stock T are 6.50% and 9.30%, respectively. In an above average economy the the expected returns for Stock S and T are 35.50% and 13.40%, respectively. What is the expected return for this two stock portfolio? (2 points) |
I received the following solutions:
Stock S: E(R)= .357808
Stock T: E(R)= .129572
Portfolio E(R) = .103463
The correct answer was 20.35% or .2035
Please help me figure out where I went wrong.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started