WindowHelp . -Womens Clothing and Shoes × ? l PrettyLittleThing USA × Take Test:

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WindowHelp . -Womens Clothing and Shoes × ? l PrettyLittleThing USA × Take Test: ABC-intermedia .blackboard.com/webapps/assessment/take/take.jsp?course assessment id- 56903 18course id- 183900 1 99% CO Thu 11:12 p r x Moving to another question will save this response. estion 2 10 points Save Answer Martin Ortner holds a $200,000 portfolio consisting of the following stocks: The risk-free rate is 5% and the market rate of return is 9 S 50,000 50, 000 150,000 1-20 0.80 2.00 Total What is the porttolio's rate of return? TT T Paragraph : Arial 9 0

Explanation / Answer

Expected return on Stock A = Risk free return + Beta(Market return – Risk free Return)

                                                = 5% + 1.20 (9% - 5%)

                                                = 5% + 1.20 (4%)

                                                = 5% + 4.80%

                                                = 9.80%

Expected return on Stock B = Risk free return + Beta(Market return – Risk free Return)

                                                = 5% + 0.80(9% - 5%)

                                                = 5% + 0.80 (4%)

                                                = 5% + 3.20%

                                                = 8.20%

Expected return on Stock A = Risk free return + Beta(Market return – Risk free Return)

                                                = 5% + 1.00 (9% - 5%)

                                                = 5% + 1.00 (4%)

                                                = 5% + 4.00%

                                                = 9.00%

Expected return on Portfolio = 50000/200000 (9.8%) + 50000/200000 (8.2%) + 150000/200000 (9.0%)

= 2.45% + 2.05% + 6.75%

= 11.25%

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