1. What is the probability of selecting Portfolio A?
Portfolio A has a weight of 0.4, therefore the probability of selecting Portfolio A is 0.4.
2. What is the probability of selecting Portfolio B?
Portfolio B has a weight of 0.3, therefore the probability of selecting Portfolio B is 0.3.
3. What is the probability of selecting Portfolio C?
Portfolio C has a weight of 0.2, therefore the probability of selecting Portfolio C is 0.2.
4. What is the probability of selecting Portfolio D?
Portfolio D has a weight of 0.1, therefore the probability of selecting Portfolio D is 0.1.
5. What is the expected return of the portfolio?
To calculate the expected return, we need to multiply the returns of each portfolio by their respective probabilities and then sum them up:
Expected Return = (0.4 * 10) + (0.3 * 8) + (0.2 * 5) + (0.1 * 3)
Expected Return = 4 + 2.4 + 1 + 0.3
Expected Return = 7.7
Therefore, the expected return of the portfolio is 7.7.
Alternate Portfolio Probability Worksheet – ACA Answers
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