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Epona wants to create a $25,000 portfolio that consists of three stocks and has an expected...

Epona wants to create a $25,000 portfolio that consists of three stocks and has an expected return of 13.34 percent. Currently, she owns $15,669 of stock A and $6,760 of stock B. The expected return for stock A is 14 percent, and for stock B it is 10.24 percent. What is the expected rate of return (in percents) for stock C?

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Answer #1

AIJiHs+2EGrfAAAAAElFTkSuQmCC

Answer is 17.47%

Investment in stock C =25000-15669-6760=$2571

13.34%-8.77%-2.77%=1.80% stock C weight * expected return

expected return of stock c=1.80%/10.28%=17.47%

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