The historical returns data for the past three years for Stock B and the stock market portfolio are: Stock B: 24%, 0%, 24%, Market Portfolios: 10%, 12%, 20%. Calculate the expected return for Stock B and the market portfolio.
A) Stock B 16%, Market Portfolio: 14%
B) Stock B 14%, Market Portfolio: 16%
C) Stock B 24%, Market Portfolio: 12%
D) None of the above

Question

Quizplus · Accepted Answer

The expected return for Stock B is calculated as the average of its returns: (24% + 0% + 24%) / 3 = 16%. The expected return for the market portfolio is: (10% + 12% + 20%) / 3 = 14%.

The Historical Returns Data for the Past Three Years for Stock