Question

Steven is going to purchase two stocks to form the initial holdings in his portfolio. Iron stock has an expected return of 25 percent, while Copper stock has an expected return of 19 percent. If David plans to invest 30 percent of his funds in Iron and the remainder in Copper, then what will be the expected return from his portfolio?

Answer 1

Answer:

20.8%

Explanation:

The computation of the expected return of the combined new portfolio is shown below:

= (Expected return of the Iron stock × weightage of iron stock) + (expected return of the copper stock × weightage of copper stock)

= (25% × 30%) + (19% × 70%)

= 7.5% + 13.3%

= 20.8%

The weighatge of current portfolio is come from

= 100% - 30%

= 70%