You Have a Portfolio Which Is Comprised of 70% of Stock

question 15

Multiple Choice

You have a portfolio which is comprised of 70% of Stock A and 30% of Stock B. What is the expected return on this portfolio?
$\begin{array}{lrrr}\text { State of the Economy } & \text { Probability } & \text { E(R) }_{A}& \text { E(R) }_{B}\\\text { Weight } & &70 \% & 30 \% \\\\\text { Boom } & .2 & 20 \% & 14\% \\\text { Normal } & .6 & 12 \% & 8 \% \\\text { Recession } & .2 & -8 \% & 5\%\end{array}$

• A)9.30%
• B)9.58%
• C)10.03%
• D)11.79%
• E)12.40%

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Definitions:

Critical Evaluator

A person skilled in assessing situations, policies, or work critically to identify improvements or establish value.

Groupthink

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Membership Homogeneity

Refers to the degree of similarity or uniformity within a group or organization's members.

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