Question

A stock has a beta of 1.65 and an expected return of 11 percent. A risk-free asset currently earns 2.6 percent. a.What is the expected return on a portfolio that is equally invested in the two assets

Answer 1

the expected return is 6.8%

Step-by-step explanation:

The computation of the expected return is shown below:

= Half basis × expected return + half basis × risk-free asset

= 0.5 × 11% + 0.5 × 2.6%

= 5.5% + 1.3%

= 6.8%

hence, the expected return is 6.8%

We simply applied the above formula so that the correct value could come

And, the same is to be considered