Question

Nervous Norman holds 70% of his assets in cash, earning 0%, and 30% of his assets in an insured savings account, earning 2%. The expected return on his portfolio Group of answer choices is 1%. cannot be determined without knowing what the dollar value of his assets is. is 2%. is 0.6% is 0%.

Answer 1

Answer: 0.6%

Explanation:

The expected return is a weighted average of the returns of the assets invested in.

70% is invested in cash which earns 0%

30% is in a savings account earning 2%

Expected return = (70% * 0%) + (30% * 2%)

= 0% + 0.6%

= 0.6%