Calculate the expected return on a portfolio of 70 percent Roll and 30 percent R

Question

Calculate the expected return on a portfolio of 70 percent Roll and 30 percent Ross by filling in the following table: (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

References

eBook & Resources

WorksheetDifficulty: 1 EasySection: 11.2 Portfolios

Problem 11-6Learning Objective: 11-02 How to calculate expected returns and variances for a portfolio.

Check my work

Security Returns
If State Occurs   State of Probability of   Economy State of Economy Roll     Ross         Bust .30 -17 % 18 %    Boom .70 17 5

Explanation / Answer

Working

Portfolio Return If Bust Economy Occur = Weight of Stock Roll * Return on Rolls + Weight of Stock Ross * Return on Ross

Portfolio Return If Bust Economy Occur = 70%*-17 + 30%*18

Portfolio Return If Bust Economy Occur = - 6.50%

Portfolio Return If Boom Economy Occur = Weight of Stock Roll * Return on Rolls + Weight of Stock Ross * Return on Ross

Portfolio Return If Boom Economy Occur = 70%*17 + 30%*5

Portfolio Return If Boom Economy Occur = 13.40%

State of Probability of Portfolio Return Product      Economy State of Economy If State Occurs [a] [b] [c] [d= b*c]    Bust                            0.30 -6.50% -1.95%    Boom                            0.70 13.40% 9.38%    E(RP) = 7.43%

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.