You want to create a $48,000 portfolio that consists of three stocks and has an expected return of 14.5 percent.Currently,you own $16,700 of Stock A and $24,200 of Stock B.The expected return for Stock A is 18.7 percent,and for Stock B it is 11.2 percent.What is the expected rate of return for Stock C?
A)13.67 percent
B)14.14 percent
C)15.38 percent
D)15.87 percent
E)16.11 percent

Question

Quizplus · Accepted Answer

Value Stock C = $48,000 - $16,700 - $24,200 = $7,100E(R_P) = 0.145 = [($16,700/$48,000) × 0.187] + [($24,200/$48,000) × 0.112] + [($7,100/$48,000) × E(R_C)]; E(R_C) = 15.87 percent

You Want to Create a $48,000 Portfolio That Consists of Three