Question

You own a portfolio that has $2,800 invested in Stock A and $3,250 invested in Stock B. The expected returns on these stocks are 14.7 percent and 9.3 percent, respectively. What is the expected return on the portfolio

Answer 1

Answer:expected return on the portfolio=11.79%

Explanation:

Calculation of the expected return on the portfolio:

total weight =  $2,800  +$3,250 =$6,050

Portfolio expected return = weight of stock A*expected return on stock A + weight of stock B*expected return on stock B

= 2800/ 6,050 x 14.7%  + 3250 /6050 x 9.3%

0.4628 x 0.147 + 0.5372 x 0.093=

0.06803 + 0.04996

=0.1179 x 100

Portfolio expected return= 11.79% 0r rounded to 11.80%