I dont remember seeing this problem on here before… A two-stock portfolio consists of the following: The portfolio consists of stock of Green Company (portfolio weight 30%) and Blue Company (portfolio weight 70%). Green’s expected return is 12%, Blue’s is 8%. Interest rates are expected to be 6%. Oil prices are expected to rise 2%. The two-factor model for Green Company is R(green) = 12% − 0.5 Fint − 0.5 Foil + egreen The two-factor model for Blue Company is R(blue) = 8% + 0.8 Fint + 0.4 Foil + eblue If interest rates are actually 9% and oil prices do not rise, the return on the portfolio will be: A) 10.55%. B) 12.89%. C) 11.35%. D) 10.17%.

it was posted couple of weeks ago


thanks guys…my bad…