Question

Multiple Choice Question 69 You have invested 40 percent of your portfolio in an investment with an expected return of 12 percent and 60 percent of your portfolio in an investment with an expected return of 20 percent. What is the expected return of your portfolio? 16.0% 17.6% 16.8% 15.2%

Answer 1

The expected return of portfolio is 16.8%.

Step-by-step explanation:

40 percent of a portfolio is invested in an investment with an expected return of 12 percent and 60 percent of your portfolio in an investment with an expected return of 20 percent.

Assume the investment to be x.

The return from the first investment

=
`0.4\ *\ 0.12\ *\ x`

= 0.048x

The return from the second investment

=
`0.6\ *\ 0.2\ *\ x`

= 0.12x

The total return from both the investments

= 0.048x + 0.12x

= 0.168x

The percentage of return

=
`(Total\ investment)/(Total\ return) \ *\ 100`

=
`(0.168x)/(x) \ * 100`

= 16.8%