Assume that there are three stocks, A, B, and C, and that you can either invest in these stocks or short sell them. There are also three possible states of nature for economic growth in the upcoming year: strong, moderate, or weak. The returns for the upcoming year on stocks A, B, and C for each of these states of nature are given below: State of Nature Stock Strong Growth Moderate Growth Weak Growth A 37 % 18.00 % −8 % B 31 % 12.00 % −4 % C 33 % 28.00 % −6 % If you invested in an equally weighted portfolio of stocks A and C, what is your portfolio return if economic growth is moderate? (Round your answer to 2 decimal places.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Assume that there are three stocks, A, B, and C, and that you can either invest in these stocks or short sell them. There are also three possible states of nature for economic growth in the upcoming year: strong, moderate, or weak. The returns for the upcoming year on stocks A, B, and C for each of these states of nature are given below:

 

  State of Nature  
Stock Strong Growth   Moderate Growth     Weak Growth  
A 37 % 18.00   % −8 %
B 31 % 12.00   % −4 %
C 33 % 28.00   % −6 %
               

 

If you invested in an equally weighted portfolio of stocks A and C, what is your portfolio return if economic growth is moderate? (Round your answer to 2 decimal places.)

 

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