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The following table shows the expected return of 3 stocks: X, Y, Z given three possible states of the economy. The last row shows the

The following table shows the expected return of 3 stocks: X, Y, Z given three possible states of the economy. The last row shows the probability of each state. Assuming you invest 20% of your portfolio in stock X, 50% in stock Y, and 30% in stock Z, what is your portfolios expected return?

Good economy

Average economy

Poor economy

Stock X return

18%

11%

-10%

Stock Y return

9%

7%

4%

Stock Z return

6%

9%

13%

Probability of state

0.2

0.7

0.1

Select one:

a. 9.45%

b. 8.33%

c. 8.25%

d. 9.50%

e. 7.40%

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