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Up0
A portfolio manager is constructing a portfolio composed of two assets. Asset A is a risky asset with an expected return of 14% and a standard deviation of 22% whereas asset B is a risk-free asset with a return of 9%. If the portfolio manager increases the weight of the risky asset to 130%, then the portfolio’s expected return is closest to:
- A. 18.2%
- B. 15.5%
- C. 16.7%
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Up6
The correct answer is B.
Expected return of the portfolio = (Weight of Asset A * Return of Asset A) + (Weight of Asset B * Return of Asset B) = (130% * 14%) + (-30% * 9%) = 15.5%
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Up4
solution please
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