Question: The formula for the expected return on a given portfolio is the following: E(r)=[r_i*E(r)] (I) Use the information below on portfolio A and B and

The formula for the expected return on a given portfolio is the following:

E(r)=[r_i*E(r)]

(I) Use the information below on portfolio A and B and find the expected return of each portfolio (Please show your work to receive full credit).

A P(Ai) B P(Bi) 190 0.1 110 0.3 850 0.2 70 0.1 100 0.4 -90 0.2 -50 0.1 -195 0.2 -130 0.2 -500 0.2

(II) Take the daily market values of the two mutual fund portfolios (A and B) below and place the data into a single ordered array to form a new portfolio C. What is the expected return of the new portfolio C? Which portfolio has more risk B or C? Why?

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