What Return Would Be Expected by an Investor Whose Portfolio

question 83

Multiple Choice

What return would be expected by an investor whose portfolio was 25% market portfolio and 75% Treasury bills if the risk-free rate was 7% and the market risk premium was 8%?

• A)8.00%
• B)9.00%
• C)10.75%
• D)13.00% Expected return on market = r_f + market risk premium
• = 7% + 8%
• = 15%
• R_f = (.25 x .07) + (.75 x 15)
• = 1)75 + 11.25

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