An investor wishes to construct a portfolio consisting of a 70 percent allocation to a stock index and a 30 percent allocation to a risk-free asset. The return on the risk-free asset is 4.5 percent, and the expected return on the stock index is 12 percent. Calculate the expected return on the portfolio.
A) 8.25 percent
B) 16.50 percent
C) 17.50 percent
D) 9.75 percent
E) 14.38 percent

Question

Quizplus · Accepted Answer

Expected return on portfolio = (0.7 x 12%) + (0.3 x 4.5%) 
Expected return on portfolio = 8.4% + 1.35% 
Expected return on portfolio = 9.75% 
Therefore, the expected return on the portfolio is 9.75%, so the answer is D.

An Investor Wishes to Construct a Portfolio Consisting of a 70