A Portfolio Consists of $18,740 of Stock K and $31,910

question 33

Multiple Choice

A portfolio consists of $18,740 of Stock K and $31,910 of Stock L.Stock K is expected to return 17 percent in a booming economy,lose 6 percent in a recession,and gain 9 percent in a normal economy.Stock L is expected to return 4 percent in a booming economy,13 percent in a recession,and 10 percent in a normal economy.The probability of the economy booming is 16 percent.What is the expected rate of return on the portfolio if the economy enters a recession?

• A)-4.59%
• B)-2.62%
• C)5.97%
• D)3.71%
• E)0.74%