Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets (P) and T-Bills.The information below refers to these assets. What are the proportions of stocks A, B, and C, respectively, in Bo's complete portfolio?

Question

Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets (P) and T-Bills.The information below refers to these assets.  What are the proportions of stocks A, B, and C, respectively, in Bo's complete portfolio?

Quizplus · Accepted Answer

The proportions of stocks A, B, and C in the risky portfolio are 50%, 30%, and 20% respectively. Since Bo's complete portfolio consists of risky assets and T-Bills, the proportions of the three stocks in the complete portfolio would be a weighted average of their proportions in the risky portfolio based on the portfolio's expected return. Using the expected return formula, we can calculate the expected return of the complete portfolio to be 11.5%. Therefore, the proportions of stocks A, B, and C in Bo's complete portfolio would be 0.32, 0.20, and 0.28 respectively. Thus, the answer is C, with proportions of 32%, 20%, and 28% for stocks A, B, and C respectively.

Your Client, Bo Regard, Holds a Complete Portfolio That Consists