Juan owns a two-stock portfolio that invests in Celestial Crane Cosmetics Company (CCC) and Lumbering...
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Juan owns a two-stock portfolio that invests in Celestial Crane Cosmetics Company (CCC) and Lumbering Ox Truckmakers (LOT). Three- quarters of Juan's portfolio value consists of CCC's shares, and the balance consists of LOT's shares. Each stock's expected return for the next year will depend on forecasted market conditions. The expected returns from the stocks in different market conditions are detailed in the following table: Market Condition Probability of Occurrence Celestial Crane Cosmetics Lumbering Ox Truckmakers Strong 0.50 30% 42% Normal 0.25 18% 24% Weak 0.25 -24% -30% Calculate expected returns for the individual stocks in Juan's portfolio as well as the expected rate of return of the entire portfolio over the three possible market conditions next year. The expected rate of return on Celestial Crane Cosmetics's stock over the next year is The expected rate of return on Lumbering Ox Truckmakers's stock over the next year is The expected rate of return on Juan's portfolio over the next year is
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