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. $$\begin{array} { l c }
\text { E( } \left. \mathrm { R } _ { \mathrm { p } } \right) & 12.00 \% \
\text { Standard Deviation of P } & 7.20 \% \
\text { T-Bill rate } & 3.60 \% \
& \
\text { Proportion of Complete Portfolio in P } & 80 \% \
\text { Proportion of Complete Portfolio in T-Bills } & 20 \% \
& \
\text { Composition of P: } \
\text { Stock A } & 40.00 \% \
\text { Stock B } &25.00 \% \
\text { Stock C } & 35.00 \% \
\text { Total } & 100.00 \% \
\hline \hline
\end{array}$$
What is the expected return on Bo's complete portfolio?
A) 10.32%
B) 5.28%
C) 9.62%
D) 8.44%
E) 7.58%

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. $$\begin{array} { l c } 
\text { E( } \left. \mathrm { R } _ { \mathrm { p } } \right) & 12.00 \% \
\text { Standard Deviation of P } & 7.20 \% \
\text { T-Bill rate } & 3.60 \% \
& \
\text { Proportion of Complete Portfolio in P } & 80 \% \
\text { Proportion of Complete Portfolio in T-Bills } & 20 \% \
& \
\text { Composition of P: } \
\text { Stock A } &  40.00 \% \
\text { Stock B } &25.00 \% \
\text { Stock C } & 35.00 \% \
\text { Total } & 100.00 \% \
\hline \hline
\end{array}$$
What is the expected return on Bo's complete portfolio?
A) 10.32%
B) 5.28%
C) 9.62%
D) 8.44%
E) 7.58%

Quizplus · Accepted Answer

The expected return on Bo's complete portfolio is calculated as the weighted average of the expected return on the risky portfolio (P) and the T-Bill rate. This is: (0.80 * 12.00%) + (0.20 * 3.60%) = 9.60% + 0.72% = 10.32%.

Your Client,Bo Regard,holds a Complete Portfolio That Consists of a Portfolio