study Assume that you are going to invest $120,000 in a two asset portfolio. You will invest $80,000 in the fully diversified market portfolio and the remainder of your funds will be invested in the riskless security. Assume the market risk premium is 8% and the riskless return is 4%. Compute the expected return on this portfolio.

9.33%

Explanation:

The expected return of  two asset portfolio is the weighted average of individual assets' expected to return as computed thus:

Portfolio expected return=(weight of market portfolio*expected return of market portfolio)+(weight of riskless security*expected return of riskless security)

weight of market portfolio=amount invested in market portfolio/total invested amount

weight of market portfolio=$80,000/$120,000=66.67%

expected return of market portfolio=market risk premium+riskless return

expected return of market portfolio=8%+4%=12%

weight of riskless security=1-66.67%=33.33%(since total investment which is 100% is 1)

expected return of riskless security=4%

Portfolio expected return=(66.67%*12%)+(33.33%*4%)

Portfolio expected return=\=9.33%

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.