You Have a Portfolio Which Is Comprised of 60% of Stock

question 40

Multiple Choice

You have a portfolio which is comprised of 60% of Stock A and 40% of Stock B. What is the expected return on this portfolio?
$\begin{array}{lllr}\text { State of the Economy } & \text { Probability } &\text {E(R) }_{A}&\text { E(R) }_{B}\\\text { Weight }&&60\%&40\%\\\\\text { Boom }&.2&20\%&15\%\\\text { Normal } & .6 & 12\% &8 \% \\\text { Recegsion } & .2& -10 \% & 3\%\end{array}$

• A)7.30%
• B)7.58%
• C)8.03%
• D)8.88%
• E)9.40%

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Definitions:

Commission

A fee or percentage of a transaction paid to an agent or employee for facilitating or completing a sale.

Accrued Interest

Interest that has accumulated but remains unpaid.

360-Day Year

A financial convention that simplifies interest calculation by assuming a year has 360 days.

Commission

A fee paid for services, usually a percentage of the total cost.