A portfolio is entirely invested into Buzz's Bauxite Boring Equity, which is expected to return 16%, and Zum's bonds, which are expected to return 8%.60% of the funds are invested in Buzz's and the
Rest in Zum's.What is the expected return on the portfolio?
A)6.4%
B)9.6%
C)12.8%
D)24.2%
E)Need additional information.

Question

Quizplus · Accepted Answer

The expected return on the portfolio can be calculated using the weighted average of the returns from Buzz's Bauxite Boring Equity and Zum's bonds. For Buzz's, it's 60% of 16%, and for Zum's, it's 40% of 8% (since 100% - 60% = 40%). Thus, the expected return = (0.6 * 16%) + (0.4 * 8%) = 9.6% + 3.2% = 12.8%.

A Portfolio Is Entirely Invested into Buzz's Bauxite Boring Equity