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Refer to the table below showing the returns of Stocks A and B. Calculate the expected return of a portfolio that is created by investing

Refer to the table below showing the returns of Stocks A and B. Calculate the expected return of a portfolio that is created by investing $300,000 in Stock A and $700,000 in Stock B.

State of Economy

Probability of State

Stock A Return

Stock B Return

Boom

0.30

40%

-10%

Normal

0.25

20%

0%

Slow Down

0.25

0%

20%

Recession

0.20

-10%

50%

A.

13.5 percent

B.

14.1 percent

C.

12.9 percent

D.

15.0 percent

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