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CFA Level 1
Portfolio Management

Portfolio Expected Return Calculation

Hard Portfolio Risk And Return Capital Asset Pricing Model

Consider a portfolio that consists solely of a risk-free asset and a risky asset. The expected return of the risky asset is 12%, and its beta is 1.5. The risk-free rate is 4%. Using the Capital Asset Pricing Model (CAPM), what is the expected return of this portfolio if it is comprised of 40% of the risky asset and 60% of the risk-free asset?

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