What is the expected return for the following portfolio? (State your answer in percent with two decimal places.) Stock Expected returns Investment AAA 334 $500,000 BBB 284 $1,300,000 ccc 14% $1,200,000 DDD 84 $1, 500,000 20.79% 16.03% 19.66% 18.16% O 22.35%

What is the expected return for the following portfolio? (State your answer in percent with two decimal places.) Stock Expected returns Investment AAA 334 $500,000 BBB 284 $1,300,000 ccc 14% $1,200,000 DDD 84 $1, 500,000 20.79% 16.03% 19.66% 18.16% O 22.35%

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 8PROB

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Concept explainers

Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.

Question

100%

please help!

What is the expected return for the following portfolio? (State your answer in percent
with two decimal places.)
Stock Expected returns Investment
AAA 334 $500,000
BBB 284 $1, 300,000
ccC 144 $1, 200,000
DDD 88 $1,50o0,000
20.79%
16.03%
19.66%
18.16%
22.35%

Expert Solution

Step 1Basic Information

The question is related to Expected Return of Portfolio. The expected return of Portfolio is calculated with the help of following formula

Expected Return of Portfolio = Expected return of Stock 1 × weight of Stock 2 + Expected Return of Stock 2 × weight of Stock 2

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