You decide to invest in a portfolio consisting of 25 percent Stock X and 75 percent Stock Y. State of economy Normal Boom Probability of state of economy O 10.66% 80% 20% Return if state occurs Stock X 8.4% 12.7% Stock Y 10.5% 13.6% What is the expected rate of return on the portfolio?
You decide to invest in a portfolio consisting of 25 percent Stock X and 75 percent Stock Y. State of economy Normal Boom Probability of state of economy O 10.66% 80% 20% Return if state occurs Stock X 8.4% 12.7% Stock Y 10.5% 13.6% What is the expected rate of return on the 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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Transcribed Image Text:You decide to invest in a portfolio consisting of 25 percent
Stock X and 75 percent Stock Y.
State of
economy
Normal
Boom
O 10.66%
8.74%
O 11.56%
9.80%
Probability of
state of
economy
12.05%
80%
20%
Return if state occurs
Stock X
8.4%
What is the expected rate of return on the portfolio?
12.7%
Stock Y
10.5%
13.6%
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