The following portfolio has an expected return of ________% and a beta of ________.
$\begin{array}{llll}
\text { Security }&\$ \text { Invested } & E(R) &\text { Beta }\
\mathrm{A} & \$ 30,000 & 16.20 \% & 1.12 \
\mathrm{~B} & \$ 24,000 & 10.50 \% & 1.38 \
\mathrm{C} & \$ 26.000 & 11.80 \% & 1.33
\end{array}$

A)12.45; 1.38
B)12.84; 1.39
C)13.06; 1.27
D)13.39; 1.40
E)13.45; 1.32

Question

The following portfolio has an expected return of ________% and a beta of ________.
$\begin{array}{llll}
\text { Security }&\$ \text { Invested } & E(R) &\text { Beta }\
\mathrm{A} & \$ 30,000 & 16.20 \% & 1.12 \
\mathrm{~B} & \$ 24,000 & 10.50 \% & 1.38 \
\mathrm{C} & \$ 26.000 & 11.80 \% & 1.33
\end{array}$

A)12.45; 1.38
B)12.84; 1.39
C)13.06; 1.27
D)13.39; 1.40
E)13.45; 1.32

Quizplus · Accepted Answer

The expected return and beta of the portfolio are calculated using the weighted average formula. For expected return: $$E(R) = \sum (w_i \times E(R_i))$$ For beta: $$\beta = \sum (w_i \times \beta_i)$$ where $w_i$ is the weight of investment in each security, $E(R_i)$ is the expected return of each security, and $\beta_i$ is the beta of each security. Calculating the weights: Total investment = $30,000 + $24,000 + $26,000 = $80,000 Weights: A = $30,000 / $80,000 = 0.375 B = $24,000 / $80,000 = 0.3 C = $26,000 / $80,000 = 0.325 Calculating expected return: E(R) = (0.375 * 16.20%) + (0.3 * 10.50%) + (0.325 * 11.80%) = 6.075% + 3.15% + 3.835% = 13.06% Calculating beta: Beta = (0.375 * 1.12) + (0.3 * 1.38) + (0.325 * 1.33) = 0.42 + 0.414 + 0.43225 = 1.27 Hence, the portfolio has an expected return of 13.06% and a beta of 1.27.

The Following Portfolio Has an Expected Return of ________% and a Beta