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You have $1,000,000 to invest in a portfolio and choose to invest half in Stock A...

You have $1,000,000 to invest in a portfolio and choose to invest half in Stock A and half in Stock B. Stock A has an expected return of 15%, a standard deviation of 20%, and a beta of 1.2. Stock B has an expected return of 8%, a standard deviation of 10%, and a beta of 0.8. The risk-free rate is 4%. What is the portfolio expected return?

The portfolio's expected return is 8%.

The portfolio's expected return is 11.5%.

The portfolio's expected return is 15%.

The portfolio's expected return is 15.5%.

The portfolio's expected return is 23%.
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Answer #1

Expected return on portfolio:

= 15%*0.50+8%*0.50

= 11.50%

Hence, correct option is "The portfolio's expected return is 11.5%."

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