What is the expected return on a portfolio that will decline in value by 13 percent in a recession, will increase by 16 percent in normal times, and will increase by 23 percent during boom times if each scenario has equal likelihood?
A)8.67 percent
B)13.00 percent
C)13.43 percent
D)17.33 percent Expected return =

Question

Quizplus · Accepted Answer

The expected return is calculated by averaging the returns of each scenario, weighted by their probabilities. With equal likelihood, the expected return is (-13% + 16% + 23%) / 3 = 8.67%.

What Is the Expected Return on a Portfolio That Will