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. $$\begin{array} { l l }
\mathrm { E } \left( \mathrm { R } _ { \mathrm { p } } \right) & 12.00 \% \
\text { Standard Deviation of P } & 7.20 \% \
\text { T-Bill rate } & 3.60 \% \
& \
\text { Proportion of Complete Portfolio in P } & 80 \% \
\text { Proportion of Complete Portfolio in T-Bills } & 20 \% \
& \
\text { Composition of P: } & \
\text { Stock A } & 40.00 \% \
\text { Stock B } & 25.00 \% \
\text { Stock C } & 35.00 \% \
\hline
\text { Total } & \underline { 100.00 \% } \
\hline
\end{array}$$
-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. $$\begin{array} { l l } 
\mathrm { E } \left( \mathrm { R } _ { \mathrm { p } } \right) & 12.00 \% \
\text { Standard Deviation of P } & 7.20 \% \
\text { T-Bill rate } & 3.60 \% \
& \
\text { Proportion of Complete Portfolio in P } & 80 \% \
\text { Proportion of Complete Portfolio in T-Bills } & 20 \% \
& \
\text { Composition of P: } & \
\text { Stock A } & 40.00 \% \
\text { Stock B } & 25.00 \% \
\text { Stock C } & 35.00 \% \
\hline
\text { Total } & \underline { 100.00 \% } \
\hline
\end{array}$$
-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. The formula is: (Proportion in P * E(Rp)) + (Proportion in T-Bills * T-Bill rate) = (0.80 * 12%) + (0.20 * 3.60%) = 9.6% + 0.72% = 10.32%.

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