What is your expected return if you invest $500 in each stock?

You have $1000 to invest and are considering buying some combination of the shares of two companies Show more You have $1000 to invest and are considering buying some combination of the shares of two companies DonkeyInc and ElephantInc. Shares of DonkeyInc will pay a return of 10 percent if the Democrats are elected an event you believe to have a 40 percent probability; otherwise the shares pay a zero return. Shares of ElephantInc will pay 8 percent if the Republicans are elected (a probability of 60 percent) zero otherwise. Either the Democrats or the Republicans will be elected. a. What is your expected return if you invest $500 in each stock? (Hint: Consider what your return will be if the Democrats win and if the Republicans win then weight each outcome by the probability that event occurs.) Expected rate of return: ____% b. Devise an investment strategy that guarantees at least a return of 4.4 percent no matter which party wins. Instructions: Enter your responses rounded to two decimal places. You should invest at least $_____in ElephantInc and at least $_____ in DonkeyInc. c. Devise an investment strategy that is riskless that is one in which the return on your $1000 does not depend at all on which party wins. Instructions: Enter your responses rounded to two decimal places. You should invest $______ in ElephantInc and $______in DonkeyInc. Show less

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