The following information regarding a portfolio of two stocks are given: w₁ = .65,w₂ = .35,E(R₁)= .12,and E(R₂)= .14.Which of the following regarding the portfolio expected return,E(R_p),is correct? A).260 B).127 C).346 D).374

Question

Quizplus · Accepted Answer

To calculate the expected return of the portfolio, we use the weighted average formula: E(R_p) = w₁ * E(R₁) + w₂ * E(R₂) Substituting the given values, we get: E(R_p) = 0.65 * 0.12 + 0.35 * 0.14 E(R_p) = 0.078 + 0.049 E(R_p) = 0.127 Therefore, the correct choice is B.

The Following Information Regarding a Portfolio of Two Stocks Are