The expected return of an equally-weighted portfolio consisting of Y and the risk-free asset would be:
A) 6 percent.
B) 10 percent.
C) 14 percent.
D) 18 percent.

Question

Quizplus · Accepted Answer

The expected return of an equally-weighted portfolio consisting of an asset Y and the risk-free asset is calculated by averaging the expected return of Y and the risk-free rate. Assuming Y has an expected return of 14% and the risk-free rate is 6%, the expected return of the portfolio would be (14% + 6%) / 2 = 10%.

The Expected Return of an Equally-Weighted Portfolio Consisting of Y