What is the expected return on a portfolio comprised of $3,000 in stock K and $5,000 in stock L if the economy is normal?
A)3.75%
B)5.25%
C)5.63%
D)5.88%
E)6.80%

Question

What is the expected return on a portfolio comprised of $3,000 in stock K and $5,000 in stock L if the economy is normal? 
A)3.75% 
B)5.25% 
C)5.63% 
D)5.88% 
E)6.80%

Quizplus · Accepted Answer

E(r)_Normal = [$3,000 F1F1F1S1F1F1F10 ($3,000 + $5,000)F1F1F1S1F1F1F10 .05] + [$5,000 F1F1F1S1F1F1F10 ($3,000 + $5,000)F1F1F1S1F1F1F10 .06)= .01875 + .0375 = .05625 = 5.63%

What Is the Expected Return on a Portfolio Comprised of $3,000