The expected return on MSFT next year is 12% with a standard deviation of 20%. The expected return on AAPL next year is 24% with a standard deviation of 30%. If James makes equal investments in MSFT and AAPL, what is the expected return on his portfolio?
A) 20%
B) 16%
C) 18%%
D) 25%

Question

Quizplus · Accepted Answer

The expected return on a portfolio can be calculated as the weighted average of the expected return of each stock. Since James made equal investments in MSFT and AAPL, the expected return on his portfolio is:
(0.5 x 12%) + (0.5 x 24%) = 18%

The Expected Return on MSFT Next Year Is 12% with a Standard