The following information regarding a portfolio of two stocks are given: w₁ = .25,w₂ = .75,E(R₁)= .08,and E(R₂)= .15.Which of the following regarding the portfolio expected return,E(R_p),is correct? A)3640 B)2300 C)1325 D)1699

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Quizplus · Accepted Answer

The expected return of the portfolio, E(Rp), is calculated as the weighted average of the expected returns of the individual stocks: E(Rp) = w1 * E(R1) + w2 * E(R2) = 0.25 * 0.08 + 0.75 * 0.15 = 0.1325 or 13.25%.

The Following Information Regarding a Portfolio of Two Stocks Are