What is the portfolio expected return and the portfolio beta if you invest 35% in A, 45% in B and 20% in the risk-free asset?

Use the following information for 23 and 24:

 

Portfolios E(Return) Standard Deviation Beta Covariance with B
A 16% 20.00% 1.2 0.025
B 12% 25.00% 0.8  
Market 14% 19.525% 1.0  
Risk Free 4%      

 

  1. What is the portfolio expected return and the portfolio beta if you invest 35% in A, 45% in B and 20% in the risk-free asset?

A. 10.2%;

 

Solution

  • 75% .35*20% .15*35% .25*6% .25*12% = .35*.2 .15*.35 ……………………………………………………….

 

 

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