Consider the following information on three stocks in four possible future states of the economy: Rate of return if state occurs State of economy Probability of state of economy Stock A Stock B Stock C Boom 0.3 0.35 0.45 0.38 Good 0.3 0.15 0.20 0.12 Poor 0.3 0.05 –0.10 –0.05 Bust 0.1 0.00 –0.30 –0.10 a. Your portfolio is invested 30% in A, 50% in B, and 20% in C. What is the expected return of your portfolio?
Consider the following information on three stocks in four possible future states of the economy: Rate of return if state occurs State of economy Probability of state of economy Stock A Stock B Stock C Boom 0.3 0.35 0.45 0.38 Good 0.3 0.15 0.20 0.12 Poor 0.3 0.05 –0.10 –0.05 Bust 0.1 0.00 –0.30 –0.10 a. Your portfolio is invested 30% in A, 50% in B, and 20% in C. What is the expected return of your portfolio?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
A4 5a
Consider the following information on three stocks in four possible future states of the economy:
|
|
|
|
||
|
State of economy |
Probability of state of economy |
Stock A |
Stock B |
Stock C |
|
Boom |
0.3 |
0.35 |
0.45 |
0.38 |
|
Good |
0.3 |
0.15 |
0.20 |
0.12 |
|
Poor |
0.3 |
0.05 |
–0.10 |
–0.05 |
|
Bust |
0.1 |
0.00 |
–0.30 |
–0.10 |
a. Your portfolio is invested 30% in A, 50% in B, and 20% in C. What is the expected return of your portfolio?
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