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You decide to invest in a portfolio consisting of 35 percent Stock A, 35 percent Stock B, and the remainder in Stock C. Based on

You decide to invest in a portfolio consisting of 35 percent Stock A, 35 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 .16 - 15.2 % - 2.1 % - 21.0 %
Normal .49 11.4 % 6.7 % 15.3 %
Boom .35 25.0 % 14.0 % 29.9 %

Multiple Choice

  • 14.56%

  • 13.35%

  • 11.81%

  • 12.32%

  • 11.29%

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