Answer:
10.05%
Explanation:
A portfolio contain two stocks A and B
The value of stock A is $84,650
The expected return of stock A is 10.6%
= 10.6/100
= 0.106
The expected return of stock B is 6.4%
= 6.4/100
= 0.064
The portfolio value is $97,500
The first step is to calculate the value of stock B
Value of B= $97,500-$84,650
= $12,850
Therefore the expected return can be calculated as follows
Expected return= value of stock A/portfolio value×expected return of stock A + value of stock B/portfolio value×expected return of stock B
=$84,650/$97,500×0.106+$12,850/$97,500×0.064
= 0.8682×0.106+0.1318×0.064
= 0.09202+0.008435
= 0.10045×100
= 10.05%
Hence the expected return on the portfolio value of $97,500 is 10.05%
