Question

Melissa owns the following portfolio of stocks. What is the return on her portfolio? Stock Amount Invested Return A $8.000 17.5% B $4,000 11.0% C $12,000 4.3% A. 8.0% B. 9.0% C. 9.8% D. 10.9%

Answer 1

Answer:

The option c is a right answer.

Explanation:

For calculating the return on her portfolio, the steps is to be followed which is shown below:

Step 1: First compute the weight-age of each portfolio.

Step 2: Multiply the weight-age amount to invested return.

Step 3: After multiply the amounts, the expected return comes.

Mathematically,

Step 1:  Weight-age is to be computed by

= Each Portfolio amount  ÷ total stock amount

where total stock amount = $8,000 + $4,000 +$12,000

                                           =$24,000

For A = $8,000 ÷ $24,000 = 0.3333

For B = $4000 ÷ $24,000 = 0.1666

For C = $12000 ÷ $24,000 = 0.50

Step 2:

Expected Return for A = Weight-age × invested return

                                      = 0.3333 × 17.5%

                                      = 5.83%

Expected Return for B  = Weight-age × invested return

                                      =  0.1666 × 11.0%

                                      = 1.83%

Expected Return for C = Weight-age × invested return

                                      = 0.50 × 4.30%

                                      = 2.15%

So, the total return on her portfolio is a sum of Expected Return for A + Expected Return for B +Expected Return for C

=  5.83% + 1.83% + 2.15%

= 9.81 %

Hence, the return on her portfolio is 9.81% .

Therefore, the option c is a right answer