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Consider the following information: State Probability Stock A Stock B Stock C Boom 0.65 0.26 0.17...

Consider the following information:

State Probability Stock A Stock B Stock C

Boom 0.65 0.26 0.17 -0.10

Bust 0.35 0.19 -0.13 -0.05

What is the expected return on an equally weighted portfolio of these three stocks? (Hint: Equally means that each stock has the same weight. Given that there are only 3 stocks, each has a weight of 1/3)

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Answer #1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.

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