Use the following information to answer questions 8-9.
An investor is considering a portfolio consisting of 60% invested in Stock X and 40% invested in Stock Y. The expected returns for the stocks are 10% for Stock X and 8% for Stock Y. Variance of the stock returns are 0.04 for Stock X and 0.02 for Stock Y, and a covariance of -0.01 between the two stocks.
-What is the expected return of the proposed portfolio?

Question

Quizplus · Accepted Answer

To find the expected return of the portfolio, we multiply the expected returns of each stock by its weight in the portfolio and add them together:

Expected Return of Portfolio = (0.6 x 10%) + (0.4 x 8%) = 6% + 3.2% = 9.2%

Therefore, the expected return of the proposed portfolio is 9.2%.

There is no additional question for Question 9.

Use the Following Information to Answer Questions 8-9