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ankoles [38]
3 years ago
5

7. You own a portfolio that has $1,750 invested in Stock A and $3,950 invested in Stock B. If the expected returns on these stoc

ks are 9% and 14%, respectively, what is the expected return on the portfolio?
Business
1 answer:
I am Lyosha [343]3 years ago
7 0

Answer:

12.46%

Explanation:

Data provided:

Amount invested in Stock A = $1,750

Amount invested in stock B = $3,950

Expected rate of return on stock A = 9%

Expected rate of return on stock B = 14%

Thus,

Expected amount of return on stock A

= Amount invested in Stock A × Expected rate of return on stock A

on substituting the respective values, we have

= $1,750 × 0.09 = $157.5

and,

Expected amount of return on stock B

= Amount invested in Stock B × Expected rate of return on stock B

on substituting the respective values, we have

= $3,950 × 0.14 = $553

Therefore, the total expected return from both the stocks = $157.5 + $553

= $710.5

Now,

the total amount invested = $1,750 + $3,950 = $5700

Hence, the expected rate of return on the portfolio

= \frac{\textup{Total expected retun}}{\textup{Total amount invested}}\times100

on substituting the values, we get

= \frac{710.5}}{5700}\times100

the expected rate of return on the portfolio = 12.46%

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