We calculate the expected return on a portfolio of 50 percent Roten and 50 percent Bradley as follows:

(1)

(2)

(3)1

(4)

State of

Probability of

Portfolio Return if State Occurs

Product

Economy

State of the

(2) × (3)

Economy

Bust

0.4

10%

0.04

Boom

0.6

25%

0.15

E(RP) =

19%