You own a portfolio with the following expected returns given the various states of the economy.What is the overall portfolio expected return? $$\begin{array} { l c c }
\text { State of Economy } & \underline { \text { Probability of State of Economy } } & \text { Rate of Return if State Occurs } \
\text { Boom } & 27 \% & 17 \% \
\text { Normal } & 70 \% & 8 \% \
\text { Recession } & 3 \% & - 11 \%
\end{array}$$
A)6.49 percent
B)8.64 percent
C)8.87 percent
D)9.86 percent
E)10.23 percent

Question

You own a portfolio with the following expected returns given the various states of the economy.What is the overall portfolio expected return? $$\begin{array} { l c c } 
\text { State of Economy } & \underline { \text { Probability of State of Economy } } & \text { Rate of Return if State Occurs } \
\text { Boom } & 27 \% & 17 \% \
\text { Normal } & 70 \% & 8 \% \
\text { Recession } & 3 \% & - 11 \%
\end{array}$$
A)6.49 percent
B)8.64 percent
C)8.87 percent
D)9.86 percent
E)10.23 percent

Quizplus · Accepted Answer

E(r) = (0.27 × 0.17) + (0.70 × 0.08) + (0.03 × -0.11) = 9.86 percent

You Own a Portfolio with the Following Expected Returns Given