What is the expected return (in $) of the given two-asset portfolio?

A) 1.90
B) 1.62
C) 2.39
D) 1.33

Question

What is the expected return (in $) of the given two-asset portfolio?A) 1.90B) 1.62C) 2.39D) 1.33

natalie braley · Accepted Answer

Final Answer : B, Explanation :  The expected return of Asset 1 (stock market) is 10% and the expected return of Asset 2 (bond market) is 6%. The weights for the two assets are 0.6 and 0.4, respectively. Therefore, the expected return of the two-asset portfolio is (0.6 x 10%) + (0.4 x 6%) = 6% + 2.4% = 8.4%. Multiplying 8.4% by the investment amount of $200 gives an expected return of $16.80.Based on the expected return, Asset 1 (stock market) would be the best choice. However, it's important to consider other factors such as risk and diversification before making an investment decision.

What is the expected return (in $) of the given two-asset portfolio?

A) 1.90
B) 1.62
C) 2.39
D) 1.33

Definitions

Learning Objectives

Learning Objectives

Related questions