What Is the Expected Return on a Portfolio Which Is

question 57

Multiple Choice

What is the expected return on a portfolio which is invested 20% in stock A, 50% in stock B, and 30% in stock C?
$\begin{array}{llcc} \text { State of } & \text { Probability of } & \underline{\text { Returns if State Occurs }} \\\underline{ \text { Economy }} & \underline{\text { State of Economy }} & \underline{\text {Stock A\quad Stock B\quad Stock C}} \\ \text {Boom } & 20\% &18\% \quad \quad 9\%\quad \quad 6\%\\ \text { Normal} & 70\%& 11\%\quad \quad 7\%\quad \quad 9\%\\ \text { Recession } & 10\%&-10\%\quad \quad 4\%\quad \quad 13\% \\\end{array}$

• A)7.40%
• B)8.25%
• C)8.33%
• D)9.45%
• E)9.50%

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