Part b: Calculate the expected return for large and small stocks using the following information.
Asset Class Scenario Probability E(return)
Large Co. Stocks Bull Market 0.40 18.50%
Flat Market 0.30 4.50%
Bear Market 0.30 -15.00%
Small Co. Stocks Bull Market 0.40 30.00%
Flat Market 0.30 8.50%
Bear Market 0.30 -22.00%
Part c: Based on your calculation for “part b” and assuming that the equity portion of your portfolio is divided equally between large and small companies, what is the expected return for the total equityportfolio?
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