What is the expected return of an equally weighted portfolio comprised of the following three stocks?
A)16.33 percent
B)18.60 percent
C)19.67 percent
D)20.48 percent
E)21.33 percent

Question

What is the expected return of an equally weighted portfolio comprised of the following three stocks? 
A)16.33 percent 
B)18.60 percent 
C)19.67 percent 
D)20.48 percent 
E)21.33 percent

Quizplus · Accepted Answer

E(R_p)_Boom = (0.19 + 0.13 + 0.31)/3 = 0.21E(R_p)_Bust = (0.15 + 0.11 + 0.17)/3 = 0.1433E(R_p) = 0.64(0.21) + 0.36(0.1433) = 18.60 percent

What Is the Expected Return of an Equally Weighted Portfolio