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:

Domestic Demand

The total demand for goods and services within the domestic economy, excluding exports but including imports.

Tariff

A levy placed by a government on products and services brought in from abroad.

Government Revenue

The money received by the government from various sources, including taxes, fees, fines, and the sale of goods and services.

Higher-Priced Domestic

Domestic products or services that are sold at a higher price compared to their foreign equivalents or competitive products in the local market.