Question
You decide to invest in a portfolio consisting of 30 percent Stock A, 30 percent Stock B, and the remainder in Stock C. Based on
You decide to invest in a portfolio consisting of 30 percent Stock A, 30 percent Stock B, and the remainder in Stock C. Based on the following information, what is the expected return of your portfolio?
State of Economy | Probability of State | Return if State Occurs | ||||||||||
of Economy | Stock A | Stock B | Stock C | |||||||||
Recession | .24 | - | 14.2 | % | - | 1.6 | % | - | 20.5 | % | ||
Normal | .44 | 10.4 | % | 6.2 | % | 14.8 | % | |||||
Boom | .32 | 24.0 | % | 13.5 | % | 29.4 | % |
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Foundations of Finance The Logic and Practice of Financial Management
Authors: Arthur J. Keown, John D. Martin, J. William Petty
8th edition
132994879, 978-0132994873
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