Kizspy | Question: 20
(Choose 1 answer)
(See picture)
A. $48.0
B. $34.0
C. $39.6
D. $42.4
You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The following table presents the annual return (per $1,000) of each of these investments under various economic conditions and the probability that each of those economic conditions will occur.
Probability
Economic Condition
Corporate Bond Fund
Common Stock Fund
0.07
Extreme recession
-400
-800
0.07
Recession
Stagnation
-100
50
60
-200
0.16
Slow growth
-100
0.25
0.3
Moderate
120
growth
120
150
300
0.15
High growth
160
If you can invest $400 in the corporate bond fund and the remaining in the common stock fund, what is the portfolio expected return of your investment?
