You decide to invest in a portfolio consisting of 25 percent Stock A, 25 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
of Economy
Return if State Occurs
Stock A Stock B Stock C
Recession
.16
-16.48
-2.78
-21.68
Normal
.55
12.68
7.38
15.98
Boom
.29
26.28
14.6%
30.5%
Multiple Choice
13.09%
12.00%
12.54%
14.18%