What Is the Expected Return on a Portfolio Comprised of €3,000

question 80

Multiple Choice

What is the expected return on a portfolio comprised of €3,000 in share K and €5,000 in share L if the economy is normal?
$\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad$ Returns if
$\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad$ State Occurs
$\begin{array}{|l|l|l|l|}\hline \text { State of Economy } & \text { Probability of State of Economy } & \text { ShareK } & \text { Share L } \\\hline \text { Boom } & 20 \% & 14 \% & 10 \% \\\hline \text { Normal } & 30 \% & 5 \% & 6 \% \\\hline\end{array}$

• A)3.75%
• B)5.25%
• C)5.63%
• D)5.88%
• E)6.80%

---

Definitions:

Political Logrolling

A practice where politicians exchange favors by supporting each other’s proposed legislations or policies.

Median-Voter Model

A model in political science that suggests the outcome of a majority vote is most likely to represent the preferences of the median voter.

Paradox Of Voting

The situation where individual rational actors have little incentive to vote, considering their single vote is unlikely to change the outcome, yet voting occurs on a large scale.

Paradox Of Voting

The scenario where the cost of voting exceeds the expected benefits, leading to the rational abstention by individuals, despite collectively affecting the outcome.