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

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

Quizplus · Accepted Answer

The expected return on the complete portfolio is calculated as: (Proportion in P * E(Rp)) + (Proportion in T-Bills * T-Bill rate) = (0.80 * 12%) + (0.20 * 3.60%) = 9.60% + 0.72% = 10.32%.

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