The Jones Company is looking to make an investment in some shares to diversify their portfolio.

They are interested in the following two stocks and have been able to determine their expected returns based on the expected different states of the economy.

State of Economy	Probability	ABC Company Expected Return	XYZ Company Expected Return
Very Poor	0.3	-15%	-9%
Poor	0.4	-5%	-2%
Good	0.1	14%	12%
Very Good		34%	32%

A) Calculate the expected return of ABC Company. (2 Mark) Please answer as a decimal to 3 decimal places.

Answer: Answer

B) Calculate the expected return of XYZ Company. (1 Mark) Please answer as a decimal to 3 decimal places.

Answer: Answer

Note: This question does not relate to the information above.

C) If the expected return for DEF Company was 20% and for JKL Company was 13% and your portfolio was made up of DEF and JKL Shares only, what would be the expected return of the portfolio if 30% was invested in DEF? (1 Marks) Please answer as a decimal to 3 decimal places.

Answer: Answer