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Stock AAA will have a return of 0% in a boom and 15% in a bust. Stock ZZZ will have a return of 24% in
Stock AAA will have a return of 0% in a boom and 15% in a bust. Stock ZZZ will have a return of 24% in a boom and -12% in a bust. The odds of a boom are 2/3 and the odds of a bust are 1/3, giving Stock AAA an expected return of 5% and Stock ZZZ an expected return of 12%. You put 76 percent of your overall investment in AAA and the remainder of your money in ZZZ. What is the expected return on your portfolio?
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