What is the expected return on a portfolio which is invested 25 percent in stock A, 55 percent in stock B, and the remainder in stock C?
A)-1.06 percent
B)2.38 percent
C)2.99 percent
D)5.93 percent
E)6.10 percent

Question

What is the expected return on a portfolio which is invested 25 percent in stock A, 55 percent in stock B, and the remainder in stock C? 
A)-1.06 percent 
B)2.38 percent 
C)2.99 percent 
D)5.93 percent 
E)6.10 percent

Quizplus · Accepted Answer

E(r)_Boom = (0.25 F1F1F1S1F1F1F10 0.19) + (0.55 F1F1F1S1F1F1F10 0.09) + (0.20 F1F1F1S1F1F1F10 0.06) = 0.109E(r)_Normal = (0.25 F1F1F1S1F1F1F10 0.11) + (0.55 F1F1F1S1F1F1F10 0.08) + (0.20 F1F1F1S1F1F1F10 0.13) = .0975E(r)_Bust = (0.25 F1F1F1S1F1F1F10 - 0.23) + (0.55 F1F1F1S1F1F1F10 0.05) + (0.20 F1F1F1S1F1F1F10 0.25) = 0.02E(r)_Portfolio = (0.05 F1F1F1S1F1F1F10 0.109) + (0.45 F1F1F1S1F1F1F10 0.0975) + (0.50 F1F1F1S1F1F1F10 0.02) = 5.93 percent

What Is the Expected Return on a Portfolio Which Is