Consider the following information:
State of the economy Probability of the Economy Stock A Stock B St ock C
Boom 0.25 0.35 0.45 0.25
Normal 0.50 0.20 0.25 0.15
POOR 0.25 -0.10 -0.15 -0.10
a. Calculate the Expected returns of the stocks individually.
b. Now, you have the expected values of the stocks, assume that, Your portfolio is invested 30% each in stock A and stock B. What is the return of the portfolio?