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QUESTION

Consider the following information: State Probability Stock A Stock B Stock C Boom 0.32 -0.05 -0.20 Bust 0.

Consider the following information:

State Probability Stock A Stock B Stock C 

Boom  0.32    -0.05    -0.01    0.20 

Bust   0.68    0.15    0.02    0.25

What is the expected return of a portfolio that has invested $2600 in Stock A, $10700 in Stock B, and  $6400 in Stock C? (Hint: calculate weights of each stock first). Enter the answer with 4 decimals (e.g. 0.1234).

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