ECONOMICS
RISK AND RETURN
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Fremont Enterprises has an expected return of 16% and Laurelhurst News has an expected return of 19%. If you put 48% of your portfolio in Laurelhurst and 52% in Fremont, what is the expected return of your portfolio?
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17.44%
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17.56%
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17.32%
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None of the above
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Explanation:
Detailed explanation-1: -There are two ways to calculate the expected return of a portfolio: Either calculate the expected return using the value and dividend stream of the portfolio as a whole, or calculate the weighted average of the expected returns of the individual stocks that make up the portfolio.
Detailed explanation-2: -The goal of portfolio models is to create a portfolio that provides the best balance between risk and return. DEA is used to measure the relative efficiency of two (or more) units in different industries, such as a bank and a school.
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