Assuming an equally weighted portfolio, and using the table below, what is the expected return of the portfolio? State of Economy Boom Normal Bust 6.4% 5.5% 6.5% 7.4% Probability of State 0.10 0.80 0.10 Security #1 15% 7% 3% Security #2 10% 5% 5% Security #3 8% 4% 25%

Assuming an equally weighted portfolio, and using the table below, what is the expected return of the portfolio? State of Economy Boom Normal Bust 6.4% 5.5% 6.5% 7.4% Probability of State 0.10 0.80 0.10 Security #1 15% 7% 3% Security #2 10% 5% 5% Security #3 8% 4% 25%

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

Assuming an equally weighted portfolio, and using the table below, what is the expected
return of the portfolio?
State of Economy
Boom
Normal
Bust
6.4%
O 5.5%
6.5%
7.4%
Probability of
State
0.10
0.80
0.10
Security #1
15%
7%
3%
Security #2
10%
5%
5%
Security #3
8%
4%
25%

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