Suppose that you hold a two-asset portfolio consisting of 100 shares of Clooney Brothers at $33 per share and 100 shares of Marx Brothers at $42 per share.Assume that you have computed the expected return on Clooney Brothers and Marx Brothers to be 20% and 12%,respectively.What is the expected return from the portfolio?
A) 20.0%
B) 16.0%
C) 15.5%
D) 12.0%
E) 13.5%

Question

Quizplus · Accepted Answer

Step 1 - We must first compute the weights of each asset in the portfolio. 11ea7fdb_fc12_fed3_a768_5d2fe3a7dd10_TB2902_11 = 11ea7fdb_fc12_fed4_a768_a1ec06b66c6f_TB2902_11 Weight of Clooney = 11ea7fdb_fc12_fed5_a768_99f10e636470_TB2902_11 = 0.44 Weight of Marx = 11ea7fdb_fc12_fed6_a768_513ec969be0f_TB2902_11 = 0.56 Step 2 - Use the weights to compute the expected return on the portfolio. E(k_p) = w₁E(k₁) + w₂E(k₂) + ... + w_nE(k_n) E(k_p) = (.44 × .20) + (.56 × .12) = .155 or 15.5%

Suppose That You Hold a Two-Asset Portfolio Consisting of 100