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Question
You own a portfolio of 5 stocks and have 3 expected states of the economy. You have twice as much invested in Stock A as you do in Stock E. How will the weights be determined when you compute the rate of return for each economic state?A. The weights will be the probability of occurrence for each economic state.
B. Each stock will have a weight of 20 percent for a total of 100 percent.
C. The weights will decline steadily from Stock A to Stock E.
D. The weights will be based on the amount invested in each stock as a percentage of the total amount invested.
E. The weights will be based on a combination of the dollar amounts invested as well as the economic probabilities.
Answer
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