What Is the Expected Return on Portfolio Which Is Invested

question 100

Multiple Choice

What is the expected return on portfolio which is invested 20% in share A, 50% in share B, and 30% in share C?
$\begin{array} { | l | l | l | l | l | } \hline & & \multicolumn{3}{|l|} { \text { Rate of Return if State Occurs } } \\\hline \text { State of Economy } & \text { Probability of State of Economy } & \text { Share A } & \text { Share B } & \text { Share C } \\\hline \text { Boom } & 20 \% & 18 \% & 9 \% & 6 \% \\\hline \text { Normal } & 70 \% & 11 \% & 7 \% & 9 \% \\\hline \text { Recession } & 10 \% & - 10 \% & 4 \% & 13 \% \\\hline\end{array}$

• A)7.40%
• B)8.25%
• C)8.33%
• D)9.45%
• E)9.50%

---

Definitions:

Impairment Testing

The process of evaluating the recoverability of the carrying amount of an asset or cash-generating unit to ensure it does not exceed its recoverable amount.

Present Value

The present worth of a future sum or series of cash flows when calculated using a given return rate.

Intangible Asset

An asset that lacks physical substance but is identifiable and provides future economic benefits.

Purchase Price

The amount paid to acquire an asset, including all costs directly attributable to bringing the asset to its intended use.