Daring Dora holds 90% of her assets in high-technology stocks, earning 12%, and 10% in long-term government bonds, earning 6%. The expected return on her portfolio:
A) is 6%.
B) is 9%.
C) is 11.4%
D) is 12%.
E) cannot be determined without knowing what the dollar value of her assets is.

Question

Quizplus · Accepted Answer

To find the expected return, we need to calculate the weighted average of the returns on the two investments:

Expected return = (0.9 x 0.12) + (0.1 x 0.06) = 0.108 + 0.006 = 0.114 = 11.4%

Therefore, the expected return on Dora's portfolio is 11.4%.

Daring Dora Holds 90% of Her Assets in High-Technology Stocks