Consider a portfolio of stocks X, Y, Z whose returns in various economic conditions are set forth below. State Probability X Y Z
Boom 0.25 22% 10% 4%
Normal 0.60 15% 9% 5%
Recession 0.15 5% 8% 7%

What is the expected return (.__% to two decimals) for a portfolio with an investment of $3000 in asset X and $7000 in asset Y?

The expected return is 10.95%

Explanation:

CALCULATE THE EXPECTED RETURN OF X

State Probability __XExpected return

Boom 0.25 22%  ___5.50%

Normal ___ 0.60 15%  ___ 9.00%

Recession _0.15 5% ___ 0.75%  

Total 15.25%

CALCULATE THE EXPECTED RETURN OF Y

State Probability __YExpected return

Boom 0.25 10%  ___ 2.50%

Normal ___ 0.60 9%  5.40%

Recession _0.15 8% ___ 1.20%  

Total 9.10%

Now calculate the weighted average return based on investment in each portfolio

Expected return = ( Expected return of Assets X x Weight of Asset X ) + ( Expected return of Assets Y x Weight of Asset Y )  

Expected return = ( 15.25% x $3000/$10000 ) + ( 9.10% x $7000/$10000 )  

Expected return = 4.575% + 6.370%

Expected return = 10.945%

Expected return = 10.95%

answer: technology

hope i

-lavira: )