Question

You have $10,000 to invest - $3,500 in Company A, the remaining amount in Company B. The expected returns for these stocks are 20% and 15%, respectively. The expected return on your portfolio is:

Answer 1

The expected return on the portfolio is:

16.75%

Step-by-step explanation:

a) Data and Calculations:

Company A Company B Total

Investment $3,500 $6,500 $10,000

Expected returns 20% 15%

Expected returns ($) $700 $975 $1,675

Expected return on

portfolio = $1,675/$10,000 * 100 = $16.75%

b) The expected return on the portfolio is calculated as the returns on the portfolio in dollars divided by the total investment in the two companies, multiplied by 100. This gives a value in percentage terms.