Corporate FInace Assignment/ Professional Essay Writers
Investment Portfolio Analysis
Consider the possible rates of return that you might earn next year on a $50,000 investment in
stock A or on a $50,000 investment in stock B, depending upon the states of the economy: recession, normal, and prosperity.
For stock A:
State of Economy Return (ri) Probability (pi)
Recession -5% 0.2
Normal 20% 0.6
Prosperity 40% 0.2.
For stock B:
State of Economy Return (RI) Probability (pi)
Recession 10% 0.2
Normal 15% 0.6
Prosperity 20% 0.2
a. What is the expected rate of return (r) for stocks A and B?
b. Which stock would you invest in? Explain. Get Finance Help Today