An Investor Is Considering Purchasing Two Stocks for a Portfolio

question 37

Essay

An investor is considering purchasing two stocks for a portfolio.Stock A will comprise of 40% of the portfolio and Stock B 60%.It is expected that three economic states may occur, with a 40% probability of a boom economy, 50% probability of an average economy and a 10% probability of a bust economy.If a boom economy transpires, stock A will yield an 11% return and stock B 15%.An average economy will see a 7% and 11% returns for stocks A and B respectively.In a bust economy, stock A will have return of -20% and stock B -5%.Given the above information, calculate the portfolio expected return.

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Definitions:

Intentionally

Done with purpose or deliberation; not accidental or unintentional.

Symptoms

Observable signs or manifestations of a condition or disease experienced by an individual.

Munchausen Syndrome By Proxy

A disorder wherein a caretaker fabricates or induces illness in someone under their care, often a child, to seek attention or sympathy.

Child

A young human being below the age of puberty or below the legal age of majority.