Question

If vou invest 63 percent of your funds in Koch stock and 37 percent in Uptown stock, what is the expected return on your portfolio? % What is the expected risk of this portfolio if the returns for the two stocks have

i. Δ nerfed positive correlation (+1.0) ?
ii. A slightly negative correlation (−0.2) ? %

Answer 1

The expected return on the portfolio can be calculated using the weighted average of the expected returns of the individual stocks.

Step-by-step explanation:

To calculate the expected return on your portfolio, you need to consider the expected returns of the two stocks and their respective weights in your portfolio. Let's assume the expected return of Koch stock is 10% and the expected return of Uptown stock is 5%. Since you are investing 63% in Koch stock and 37% in Uptown stock, you can calculate the expected return using the following formula:

Expected Return = (Weight of Koch Stock * Expected Return of Koch Stock) + (Weight of Uptown Stock * Expected Return of Uptown Stock)

Expected Return = (0.63 * 10%) + (0.37 * 5%) = 6.3% + 1.85% = 8.15%

Therefore, the expected return on your portfolio is 8.15%.