Use the Following Information to Answer the Question(s)below

question 45

Multiple Choice

Use the following information to answer the question(s) below.
Assume that the economy has three types of people.20% are fad followers,75% are passive investors,and 5% are informed traders.The portfolio consisting of all informed traders has a beta of 1.4 and an expected return of 16%.The market has an expected return of 10% and the risk-free rate is 4%.
-The expected return for the fad follower's portfolio is closest to:

• A)11.5%.
• B)12.4%.
• C)13.6%.
• D)16.0%.