Statistical measures of stand-alone risk

Remember, the expected valueof a probability distribution is a statistical measure of the average (mean) value expected to occur during all possible circumstances. To compute an assets expected return under a range of possible circumstances (or states of nature), multiply the anticipated return expected to result during each state of nature by its probability of occurrence.

Consider the following case:

Joshua owns a two-stock portfolio that invests in Blue Llama Mining Company (BLM) and Hungry Whale Energy (HWE). Three-quarters of Joshuas portfolio value consists of BLMs shares, and the balance consists of HWEs shares.

Each stocks 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:

Market ConditionProbability of OccurrenceBlue Llama MiningHungry Whale EnergyStrong25%20%28%Normal45%12%16%Weak30%-16%-20%

Calculate expected returns for the individual stocks in Joshuas 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 Minings stock over the next year is ? .The expected rate of return on Hungry Whale Energys stock over the next year is ? .The expected rate of return on Joshuas portfolio over the next year is ? .