Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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%
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