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How much is the expected return on the total portfolio

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Reference no: EM132792743

Mr. White's portfolio is as follows:

  • He owns $3,000 of Nortel stock (Nortel has an expected return of 15%)
  • He is short $2,000 of IBM stock (IBM has an expected return of 13%)
  • He owns $9,000 of T-bills (T-bills have an expected return of 5%)
  • He also borrowed $4,000 to help buy the assets in his portfolio.

Problem 1: The interest rate he has to pay on his borrowing is 6%. How much is the expected return on the total portfolio he holds?

a. 6.6667%

b. 6.75%

c. 7%

d. 8.2857%

e. 9%

f. 9.2%

g. 11%

h. None of the above is within 1% of the correct answer.

Reference no: EM132792743

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