Question

Your two favorite companies are Firefox and Twitter. You feel like every year in the future will be randomly ether a thumbs up year or a "humbs down" year, which will determine how high the annual return on your stock investment into each of these companies' stock will be as shown in the table below: Firefox State Probability of the state of the economy economy "Thumbs up" 30% 70% Reum.254 Return 15% 20% Return 10% "Thumbs down (a) The Expected return for Twitter's stock equals (b) The Expected Return of a portfolio with 40% invested into Firefox lock and invested into Twitter stock equals

Answer 1

1.
Expected return for Twitter=30%*15%+70%*10%
=11.50000%

2.
Expected return for Facebook=30%*25%+70%*20%
=21.50000%

Expected return for portfolio=40%*21.5%+60%*11.5%=15.50000%