17. You invest $200 in a risk-free asset and $800 in a risky portfolio. The risk

Question

17. You invest $200 in a risk-free asset and $800 in a risky portfolio. The risk-free rate is 4%. The risky portfolio has an expected return of 12% and a volatility of 20%. of your portfolio's return? A. 20% B.16% C.12% D. 4% The probability distribution of returns for two stocks A and B is given in the following table. Use this table to answer questions 18 and 19 Return of stock A Return of stock B Scenario Good Normal Bad Probability 0.25 0.35 0.02 0.08 0.01 0.1 005 0.4 0.05 and that of stock B is 18. Expected return of stock A is A. 2.16%, 0.45% B. 3.25%, 196 C, 2.16%-1.24% D. 3.25%,-1.65%

Explanation / Answer

Portfolio volatility= Weight1*Volatility1+ Weight2*Volatility2

                              = ($200/$1,000)*0%+($800/$1,000)*20%

                              = 16%

Hence, the correct option is B.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

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