Consider the Following Table with Information on the Weightings and Expected

question 52

Multiple Choice

Consider the following table with information on the weightings and expected returns of three assets held by an FI. $$\begin{array} { | c | c | c | } \hline \text { Loan } i & \text { Weight } i & \text { Expected return } i \\\hline 1 & 0.15 & 12.35 \% \\\hline 2 & 0.55 & 10.25 \% \\\hline 3 & 0.30 & 15.75 \% \\\hline\end{array}$$ What is the expected return on the portfolio (round to two decimals) ?

• A)(0.15 * 12.35 + 0.55 * 10.25 + 0.30 * 15.75) / 3 = 4.07%
• B)(0.15 * 12.35 + 0.55 * 10.25 + 0.30 * 15.75) * 3 = 36.66%
• C)0.15 * 12.35 + 0.55 * 10.25 + 0.30 * 15.75 = 12.22%
• D)(12.35 + 10.25 + 15.75) / 3 = 12.78%

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Definitions:

Short-Run Losses

Temporary financial deficits that a firm may face due to operating costs exceeding total revenue in the short term.

Zero Economic Profit

A situation where a firm's total revenue is exactly equal to its total costs, including both explicit and implicit costs.

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, representing surplus remaining after all costs are covered.

Perfectly Competitive

A market scenario characterized by an infinite number of buyers and sellers, freedom of entry and exit, and a product that is homogenous across all suppliers.