You Have a Portfolio Which Is Comprised of 55% of Stock

question 88

Multiple Choice

You have a portfolio which is comprised of 55% of Stock A and 45% of Stock B. What is the expected return on this portfolio?
$\begin{array}{lrrr}\text { State of the Economy } & \text { Probability } & \text { E(R) }_{A}& \text { E(R) }_{B}\\\text { Weight } & & 55 \% & 45 \% \\\text { Boom } & .15 & 19 \% & 12\% \\\text { Normal } & .65 & 11 \% & 7 \% \\\text { Recession } & .20 & -16 \% & 1 \%\end{array}$

• A)5.45%
• B)6.69%
• C)7.14%
• D)7.60%
• E)8.22%

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Definitions:

Governor Filter

A filter used in the governor system of an engine to clean the oil or fluid that controls the speed and prevents contamination.

Magnetic Drain Plug

A type of plug placed in the oil pan or similar component, featuring a magnet that attracts and holds metal fragments to prevent them from circulating in the system.

Transmission Fluid

A special lubricant designed for transmissions, providing cooling and the necessary pressure for operation, while also lubricating moving parts within the transmission.

Main Pressure

The primary hydraulic pressure in a system, such as an automatic transmission, crucial for its operation and control of gears.