Question

Nancy has a portfolio of two stocks. Stock A has an expected return of 8% and stock B has an expected return of 10%. Her funds are allocated with 54% in stock A and 46% in stock B. What is the portfolio expected return?
a. 8.38%
b. 8.92%
c. 9.46%
d. 10.00%
e. 10.54%

Answer 1

Answer:

b. 8.92%

Explanation:

Calculation for the portfolio expected return

Using this formula

Portfolio expected return = (Stock A allocated fund x Stock A expected return) + (Stock B allocated fund x Stock B expected return)

Let plug in the formula

Portfolio expected return= (54%*8%) + (46%*10%)

Portfolio expected return=0.0432+0.046

Portfolio expected return=0.0892*100

Portfolio expected return =8.92%

Therefore the portfolio expected return will be 8.92%