Consider the Following Portfolio of Assets What Is the Expected Return on the Portfolio (Round to |

Multiple Choice

Consider the following portfolio of assets: $$\begin{array} { | c | c | c | c | c | c | } \hline \text { Loan } i & \text { Weight } i & \text { Expected return } i & \sigma & \sigma ^ { 2 } & \\\hline 1 & 0.45 & 15 \% & 6.05 \% & 36.60 \% & \mathrm { P } _ { 12 } = - 0.2 \\\hline 2 & 0.55 & 13 \% & 8.75 \% & 76.56 \% & \sigma _ { 12 } = - 4.0 \% \\\hline\end{array}$$ What is the expected return on the portfolio (round to two decimals) ?

A) (15% + 13%) / 2 = 14.00%
B) (0.45) ²(15%) + (0.7) ²(13%) = 9.41%
C) [(0.45) ²(15%) + (0.7) ²(13%) ] * 2 = 18.82%
D) 0.45(15%) + 0.7(13%) = 15.85%