The returns for two assets,A and B,are 5% and 8% respectively.If an investor holds 25% of her wealth in asset A,what is the continuously compounded return of a value-weighted portfolio comprising assets A and B?
A) $3.25 \%$
B) $6.25 \%$
C) $6.75 \%$
D)$7.25 \%$

Question

The returns for two assets,A and B,are 5% and 8% respectively.If an investor holds 25% of her wealth in asset A,what is the continuously compounded return of a value-weighted portfolio comprising assets A and B?
A) $3.25 \%$ 
B) $6.25 \%$
C) $6.75 \%$
D)$7.25 \%$

Quizplus · Accepted Answer

Using equation 1.16,page 23,the value-weighted return on the portfolio (R)is equal to (0.25)(5%)+ (0.75)(8%)= 7.27%.

The Returns for Two Assets,A and B,are 5% and 8 3.25%3.25 \%3.25%

The Returns for Two Assets,A and B,are 5% and 8 $3.25 \%$