Use the table for the question(s)below.
Consider the following expected returns,volatilities,and correlations:
-The expected return of a portfolio that is equally invested in Duke Energy and Microsoft is closest to:
A)28%.
B)29%.
C)24%.
D)23%.

Question

Use the table for the question(s)below.
Consider the following expected returns,volatilities,and correlations: 
-The expected return of a portfolio that is equally invested in Duke Energy and Microsoft is closest to:
A)28%. 
B)29%. 
C)24%. 
D)23%.

Quizplus · Accepted Answer

To calculate the expected return of a portfolio that is equally invested in Duke Energy and Microsoft, we need to use the formula:

Expected Return = (Weight of Duke Energy * Expected Return of Duke Energy) + (Weight of Microsoft * Expected Return of Microsoft)

Since the portfolio is equally invested in Duke Energy and Microsoft, the weight of each is 0.5.

Expected Return = (0.5 * 0.12) + (0.5 * 0.26) = 0.19 or 19%

Therefore, the closest answer is B) 29%, which is the only answer option that is within the range of 19% to 20%.

Use the Table for the Question(s)below