Question

You own a portfolio that has $3,480 invested in Stock A and $7,430 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

Expected return on portfolio will be 10.04 %

Step-by-step explanation:

We have given that invested amount in stock A = $3480

Invested amount in stock B = $7430

Return on stocks A = 8 %

Return on stock B = 11 %

We have to find the expected return on portfolio

Expected return on portfolio =
`(Return\ on \ stock\ A* value\ of\ A)/(value\ of\ A+value\ of\ B)+(Return\ on \ stock\ B* value\ of\ B)/(value\ of\ A+value\ of\ B)=(0.08* 3480)/(3480+7430)+(0.11* 7430)/(7430+3480)=0.1004`

So expected return on portfolio will be 10.04 %