Calculating a Portfolio's Expected Return

An investor holds a portfolio of two stocks, with 40% invested in a stock with an expected return of 8%. What _best describes_ the other information needed to calculate the portfolio's expected return?

Incorrect. The portfolio's expected return is not dependent on the covariance of the stocks making up that portfolio.

Correct. This calculation needs the expected return of each stock and the weight invested in each stock. The weight of the other stock can be determined from the weight of the first, so only the second stock's expected return is needed.

Incorrect. Since there are only two stocks and the weight of one is given, the weight of the other can be determined so that 100% of the portfolio is invested in those two stocks.

The covariance of the stock's returns

The expected return of the other stock

The percentage invested in the other stock