A Portfolio Is Expected to Return 18 Percent in a Booming

question 86

Multiple Choice

A portfolio is expected to return 18 percent in a booming economy,13 percent in a normal economy,and lose 11 percent if the economy falls into a recession.The probability of a boom is 3 percent while the probability of a recession is 25 percent.What is the overall portfolio expected return?

• A)8)40%
• B)6)83%
• C)7)15%
• D)6)05%
• E)2)81%

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Definitions:

Equity Of Redemption

The equitable right of a mortgagor to acquire the title to the mortgaged property by payment of the debt secured by the mortgage.

Arrears

A state of being behind in fulfilling obligations, such as payments on a loan, rent, or utilities.

Purchaser

An individual or entity that buys goods or services from a seller.

Payments

The act of giving money in exchange for goods, services, or to fulfil a legal obligation.