An investor would like to combine a three-assets portfolio consisting of bonds, common stocks and preferred shares. He wants to calculate the expected return on his portfolio given the following information:

The real rate of return is 1.9%

The Inflation premium is 2.3%

The bonds he is buying pay 10% coupons semiannually and mature in 15 years. These bonds have the following risks associated with them:

The market risk premium is 10%

The T-Bill rate is 2%

The beta of the common stock company is 3.89, and currently paid a dividend of 3$ per share. These dividends are expected to grow at a constant rate of 2%

The company he is buying the preferred shares (2% with par value of 100$) from has estimated the following scenarios in the future:

Most like outcomes probability is 50% with a return of 9%

Optimistic cases probability is 30% and has a return of 10%

Pessimistic case has a return of 7%

He wants to invest $10,000, half of that in common stocks and $3000 in Bonds and the rest in preferred shares.

An investor would like to combine a three-assets portfolio consisting of bonds, common stocks and preferred shares. He wants to calculate the expected return on his portfolio given the following information: - The real rate of return is 1.9% - The Inflation premium is 2.3% - The bonds he is buying pay 10% coupons semiannually and mature in 15 years. These bonds have the following risks associated with them: - The market risk premium is 10% - The T-Bill rate is 2% - The beta of the common stock company is 3.89, and currently paid a dividend of 3$ per share. These dividends are expected to grow at a constant rate of 2% - The company he is buying the preferred shares ( 2% with par value of 100$ ) from has estimated the following scenarios in the future: - Most like outcome's probability is 50% with a return of 9% - Optimistic case's probability is 30% and has a return of 10% - Pessimistic case has a return of 7\%