You have a portfolio which is comprised of 60 percent of stock A and 40 percent of stock B.What is the expected rate of return on this portfolio?
A)12.76 percent
B)12.88 percent
C)13.44 percent
D)13.56 percent
E) 13.85 percent

Question

You have a portfolio which is comprised of 60 percent of stock A and 40 percent of stock B.What is the expected rate of return on this portfolio? 
A)12.76 percent 
B)12.88 percent 
C)13.44 percent 
D)13.56 percent 
E) 13.85 percent

Quizplus · Accepted Answer

E(R-Boom) = .60(15%) + .40(9%) = 12.6%E(R-Normal) = .60(8%) + .40(20%) = 12.8%E(R-Portfolio) = (.20)(12.6%) + (.80)(12.8%) = 12.76%

You Have a Portfolio Which Is Comprised of 60 Percent