What is the expected return of a portfolio that has invested $17,553 in Stock A, $19,931 in Stock B, and $3,294 in Stock C?

Consider the following information: State Probability Stock A Stock B Stock C Boom 0.32 -0.04 0.13 0.18 Bust 0.68 -0.06 0.1 -0.06

What is the expected return of a portfolio that has invested $17,553 in Stock A, $19,931 in Stock B, and $3,294 in Stock C? (Hint: calculate weights of each stock first). Enter the answer with 4 decimals (e.g. 0.1234).

Expert Solution

Solution :

The expected return of the portfolio = 0.0319

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

jeff jeffy answered 2 years ago

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