Quantitative Methods Q173

0. A portfolio manager had invested a total amount of $300,000 in stocks and fixed income instruments at the start of the year. Equity investments represented 60% of the portfolio and generated year-end return of 35%, whereas the fixed income instruments yielded 15%. The correlation of stock returns with fixed income instruments’ returns was found to be 20%. Based on the given data, the portfolio return would be closest to:

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Option : C
Explanation : The total portfolio return is calculated as the weighted average return of the portfolio constituents. Portfolio return = (0.6 * 0.35) + (0.4 * 0.15) = 0.27 = 27.0%

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