The risk-free rate is 3% and the expected return of the market portfolio is 12%. You wish to make a portfolio using Stock A, which has a beta of 0.75, and Stock B, which has a beta of 1.40. If you invest 50% of your wealth in each stock, what will the expected return of your portfolio be?

Please write your answer in percentage terms to two decimal places (7.21 percent is 7.21, not 0.0721).

Answer rating: 100% (QA)

To calculate the expected return of the portfolio we need to use the formula Expected return of portfolio weight of stock A x expected return of stock ... View the full answer