ECONOMICS
RISK AND RETURN
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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8.9%
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9.5%
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7.8%
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6.5%
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Detailed explanation-1: -Calculating Expected Return The expected return is calculated by multiplying the weight of each asset by its expected return. Then add the values for each investment to get the total expected return for your portfolio.
Detailed explanation-2: -Calculation of the Expected Return and Standard Deviation of a Portfolio half Invested in Company A and half in Company B. Standard Deviation of Portfolio = (Weight of Company A * Expected Return of Company A) + ((Weight of Company B * Expected Return of Company B)
Detailed explanation-3: -Expected Return for a Two Asset Portfolio The expected return of a portfolio is equal to the weighted average of the returns on individual assets in the portfolio.
Detailed explanation-4: -Expected return = Risk Free Rate + [Beta x Market Return Premium] Expected return = 2.5% + [1.25 x 7.5%] Expected return = 11.9%