Given the following forecasts,what is the expected return for a portfolio that has $1,500 invested in Stock A and $4,500 invested in Stock B?
A) 12.0%
B) 12.5%
C) 14.0%
D) 14.2%

Question

Quizplus · Accepted Answer

Portfolio weight in A = $1,500/($1,500+$4,500)= 0.25,Portfolio weight in B = 1 - 0.25 = 0.75 E(R_A)= 25%*20% + 15%*50% + (-5%)*30% = 11% E(R_B)= 35%*20% + 25%*50% + (-15%)*30% = 15% E(R_P)= 11%*0.25 + 15%*0.75 = 14%

Given the Following Forecasts,what Is the Expected Return for a Portfolio