Reference no: EM132795029

Given the following information:

Firm                 Portfolio Weight            Volatility                 Correlation with Market Portfolio

Walmart              0.25                       14%                          0.7

Exxon Oil             0.35                         18%                          0.6

Red Metal            0.4                          15%                            0.5

The market portfolio's expected return is 15% with a volatility of 10%, and the risk-free rate of interest is 5%.

Problem 1: What is the expected return for Exxon Oil?

Group of answer choices

Option 1: 13.4%

Option 2: 12.6%

Option 3: 15.0%

Option 4: 15.8%

Problem 2: The expected return on the portfolio of the above three stocks is closest to:

Group of answer choices

Option 1: 14.2%

Option 2: 12.8%

Option 3: 11.4%

Option 4: 10.0%