You Own a Portfolio with the Following Expected Returns Given

question 83

Multiple Choice

You own a portfolio with the following expected returns given the various states of the economy.What is the overall portfolio expected return?
$\begin{array}{|l|l|l|}\hline \text { State of Economy } & \text { Probability of State of Economy } & \text { Rate of Return if StateOccurs } \\\hline \text { Boom } & 15 \% & 18 \% \\\hline \text { Normal } & 60 \% & 11 \% \\\hline \text { Recession } & 25 \% & -10 \% \\\hline\end{array}$

• A)6.3%
• B)6.8%
• C)7.6%
• D)10.0%
• E)10.8%

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Definitions:

Assets

Resources owned or controlled by a business or individual that are expected to produce economic value or benefit in the future.

Return on Assets

A measure of how effectively a company is using its assets to generate earnings.

Revenues

Revenues are the total amount of money received by a company for goods sold or services provided during a specific period.

Expenses

Costs incurred in the process of earning revenue, often categorized into operating and non-operating expenses.