Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets (P) and T-Bills. The information below refers to these assets. E(Rp) 12.00 % Standard Deviation of P 7.20 % T-Bill rate 3.60 % Proportion of Complete Portfolio in P 80 % Proportion of Complete Portfolio in T-Bills 20 % Composition of P: Stock A 40.00 % Stock B 25.00 % Stock C 35.00 % Total 100.00 % What is the expected return on Bo's complete portfolio?
A. 3.48 % B. 7.55 % C. 9.28 % D. 10.67 % <--Correct Answer
E(Rp) = (1/6)*0% + (1/2)*7% + (1/3)*12% = 9,33% or about 9,3%.
This is the correct answer.