Question

You own a portfolio that has $2,950 invested in Stock A and $3,700 invested in Stock B. If the expected returns on these stocks are 8 percent and 11 percent, respectively, what is the expected return on the portfolio

Answer 1

9.67%

Step-by-step explanation:

The total value of the portfolio = $ 2,950 + $ 3,700 = $6,650

The proportion of the portfolio invested in stock A = $ 2,950 / $ 6,650 = 44.36% . The proportion of the portfolio invested in stock B = 100 - 44.36% = 55.64%

The expected return of the portfolio = 0.4436*0.08 + 0.5564*0.11 = 0.035488 + 0.061204 = 0.096692 = 9.67%