You are given the following probability distribution of returns of two stocks A and B. If you form a portfolio by investing $750,000 in stock A and $1,250,000 in Stock B, calculate the expected return of your portfolio.
State of Economy | Probability of State | Return of Stock A | Return of Stock B |
Recession | 0.10 | 55% | -20% |
Slow Down | 0.20 | 40% | 10% |
Normal Economy | 0.45 | 10% | 15% |
Boom | 0.25 | -20% | 40% |
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