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What Is the Expected Return on a Portfolio Comprised of €4,000

Question 4

Multiple Choice

What is the expected return on a portfolio comprised of €4,000 in share M and €6,000 in share N if the economy enjoys a boom period?
\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad Returns if
\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad State Occurs
 State of Economy  Probability of State of Economy  ShareM  Share N  Boom 10%18%10% Normal 75%7%8% Recession 15%20%6%\begin{array}{|l|l|l|l|}\hline \text { State of Economy } & \text { Probability of State of Economy } & \text { ShareM } & \text { Share N } \\\hline \text { Boom } & 10 \% & 18 \% & 10 \% \\\hline \text { Normal } & 75 \% & 7 \% & 8 \% \\\hline \text { Recession } & 15 \% & -20 \% & 6 \% \\\hline\end{array}


A) 6.4%
B) 6.8%
C) 10.4%
D) 13.2%
E) 14.0%

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