What Is the Expected Return on a Portfolio Comprised of $4,000

question 102

Multiple Choice

What is the expected return on a portfolio comprised of $4,000 in stock M and $6,000 in stock N if the economy enjoys a boom period?
$\begin{array}{llcc} \text { State of } & \text { Probability of } & \underline{\text { Returns if State Occurs }} \\\underline{ \text { Economy }} & \underline{\text { State of Economy }} & \underline{\text {StockM\quad Stock N}} \\ \text {Boom } & 10\% &18\% \quad \quad 10\%\\ \text { Normal} & 75\%& 7\%\quad \quad8\%\\\text { Recession }&15\%&-20\%\quad \quad6\%\\\end{array}$

• A)6.4%
• B)6.8%
• C)10.4%
• D)13.2%
• E)14.0%

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Definitions:

Pump Division

A sector within a company that specializes in the production, sales, or maintenance of pumps.

Transfer Price

The price at which goods or services are transferred between departments or subsidiaries of the same company.

Pump Division

A specialized unit or segment within a company focused on the production or sales of pump-related products.

Outside Supplier

An external entity that provides goods or services to a company, often used in the context of manufacturing or procurement.