XYZ Investment Corporation Is Considering a Portfolio with 70% Weighting

question 392

Multiple Choice

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 expected return for the portfolio.

• A) 8%
• B) 7%
• C) 6%
• D) 5%
• E) 4%

---

Definitions:

Death

The cessation of all biological functions that sustain a living organism.

Early Childhood

A period in human development from birth to the beginning of formal schooling, generally considered up to the age of 8 years.

Activity Level

Activity level generally refers to the overall energy expenditure and physical movement of an individual, often categorized in terms of frequency, intensity, and duration of activities.

Individual Differences

Variations among individuals in their psychological traits, behaviors, and physiological characteristics.