A Portfolio Is Expected to Return 18 Percent in a Booming

question 48

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:

Implicit Premise

An unstated element of an argument that is needed to make the conclusion follow from the premises given.

Argument's Structure

Refers to the way in which the premises of an argument support its conclusion, involving the logical relations between them.

Premises

Statements or propositions that provide the reason or support for the conclusion in an argument.

Distilling

The process of purifying a liquid by heating and cooling, or the extraction of the essential meaning or most important aspects of something.