Question

In: Finance

A portfolio is entirely invested into BBB stock, which is expected to return 16.4 percent, and...

A portfolio is entirely invested into BBB stock, which is expected to return 16.4 percent, and ZI bonds, which are expected to return 8.6 percent. 48 percent of the funds are invested in BBB and the rest in ZI. What is the expected return on the portfolio? Select one: a. 13.64% b. 14.36% c. 12.34% d. 14.20% e. 11.69%

Solutions

Expert Solution

Calculation of the expected return of the portfolio
Expected Return = Investment n BBB* Return+ Investment in ZI* Return
16.4*48%+8.6*52%
7.87+4.47
12.34%
The expected return of the portfolio is 12.34%
The correct option is
C. 12.34%

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