Mike's portfolio has a 2-year expected return of 21.70%. What is the expected return for one year?
A)10.85%
B)12.50%
C)13.33%
D)14.22%
E)15.34%

Name: Mike's portfolio has a 2-year expected return of 21.70%. What is the expected return for one year? A)10.85% B)12.50% C)13.33% D)14.22% E)15.34%
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The expected return for one year is the square root of the 2-year expected return minus 1. So, the expected return for one year is sqrt(1.217) - 1 = 0.1085, or 10.85%.

Mike's Portfolio Has a 2-Year Expected Return of 21