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Compute the expected return of portfolio

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Assume that the CAPM holds, the risk-free rate is 2% per year, the expected return on the market is 10% per year and that the annualized volatility (standard deviation) of market returns is 20%.

Assume that the beta of IBM is 1.0, the beta of GM is 2.0, and their respective annualized return volatilities are 25% and 80%.

Suppose that you invest 60% in IBM and 40% in GM. Compute the expected return of your portfolio.

Reference no: EM133055873

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