You have a portfolio which is comprised of 75 percent of stock A and 25 percent of stock B.What is the expected rate of return on this portfolio?

A) 10.70 percent
B) 10.87 percent
C) 11.13 percent
D) 12.11 percent
E) 12.80 percent

Question

You have a portfolio which is comprised of 75 percent of stock A and 25 percent of stock B.What is the expected rate of return on this portfolio?

A) 10.70 percent 
B) 10.87 percent 
C) 11.13 percent 
D) 12.11 percent 
E) 12.80 percent

Quizplus · Accepted Answer

E(R_Boom) = (0.75 × 24) + (0.25 × 15) = 21.75 E(R_Norm) = (0.75 × 12) + (0.25 × 12) = 12.00 E(R_Rec) = (0.75 × -36) + (0.25 × 8) = -25.00 E(R_Port) = (0.10 × 21.75) + (0.85 × 12) + (0.05 × -25) = 11.13 percent

You Have a Portfolio Which Is Comprised of 75 Percent