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XYZ Investment Corporation is considering a portfolio with 70% weighting in a cyclical stock and 30% weighting in a countercyclical stock. It is expected that

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XYZ Investment Corporation is considering a portfolio with 70% weighting in a cyclical stock and 30% weighting in a countercyclical stock. It is expected that there will be three economic states; Good, Average and Bad, each with equal probabilities of occurrence. The cyclical stock is expected to have returns of 25%,5% and 1% in Good, Average and Bad economies respectively. The countercyclical stock is expected to have returns of 8%,2% and 14% in Good, Average and Bad economies respectively. Given this information, calculate portfolio return. A) 8.03% B) 6.5% C) 5.0%

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