Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You are given the following probability distribution of returns of two stocks A and B. If you form a portfolio by investing $750,000 in stock
You are given the following probability distribution of returns of two stocks A and B. If you form a portfolio by investing $750,000 in stock A and $1,250,000 in Stock B, calculate the expected return of your portfolio.
State of Economy | Probability of State | Return of Stock A | Return of Stock B |
Recession | 0.10 | 55% | -20% |
Slow Down | 0.20 | 40% | 10% |
Normal Economy | 0.45 | 10% | 15% |
Boom | 0.25 | -20% | 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