What Is the Expected Return on a Portfolio That Will

question 45

Multiple Choice

What is the expected return on a portfolio that will decline in value by 13% in a recession,will increase by 16% in normal times,and will increase by 23% during boom times? Each scenario has an equal likelihood of occurrence.

• A) 8.67%
• B) 13.00%
• C) 13.43%
• D) 17.33%

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Definitions:

Rates Of Return

The gains from an investment over a specific period, often measured as a percentage of the investment's initial cost. This represents the profitability of an investment.

Recent Experience

This term refers to the latest available data or outcomes from events, often used to analyze current trends or performance.

Prior Beliefs

The pre-existing beliefs or expectations an individual holds before receiving new information or evidence.

Memory Bias

A cognitive bias that affects the accuracy of recall and the influence of memories on decision making, often leading to skewed or selective recollections.