Answer:
9.88%
Explanation:
Calculation for the expected return on the portfolio
First step is to find Total portfolio vale using this formula
Total portfolio vale=(Stock A portfolio + Stock B portfolio)
Let plug in the formula
Total portfolio vale= (2,650+4,450)
Total portfolio vale= 7,100
Second step is to calculate for the Expected portfolio return of Stock A by dividing Stock A portfolio by the Total portfolio vale then multiply it by the expected returns percentage
Expected portfolio return Stock A = 2,650 / 7,100
Expected portfolio return Stock A = 0.3732 *0.08
Expected portfolio return Stock A =0.02986
The third step is to calculate for the Expected portfolio return of Stock B by dividing Stock B portfolio by the Total portfolio vale then multiply it by the expected returns percentage
Expected portfolio return Stock B=$4,450/$7,100
Expected portfolio return Stock B=0.6268 *0.11 Expected portfolio return Stock B= 0.06895
The last step is add up the expected return on the portfolio for both Stock A and Stock B
Using this formula
Expected return on the portfolio=(Stock A Expected return on the portfolio + Stock B Expected return on the portfolio)
Let plug in the formula
Expected return on the portfolio=0.02986+0.06895
Expected return on the portfolio= 0.0988 *100 Expected return on the portfolio= 9.88%
Therefore the expected return on the portfolio will be 9.88%
