Question

a portfolio consists of $17,200 in stock m and $28,400 invested in stock n. the expected return on these stocks is 9.90 percent and 13.50 percent, respectively. what is the expected return on the portfolio?

Answer 1

The expected return on the portfolio is calculated by taking a weighted average of the returns of the individual assets proportionate to their amounts in the portfolio. In this case, the expected return on the portfolio is 12.14%.

Step-by-step explanation:

The expected return on a portfolio is calculated by multiplying the amount invested in each stock by its expected return and then dividing the sum of these products by the total investment in the portfolio. In this case, we have $17,200 invested in stock M with an expected return of 9.90% and $28,400 invested in stock N with an expected return of 13.50%. To find the portfolio's expected return, we do the following calculation:

• Expected return from stock M = $17,200 * 9.90% = $1,703.20
• Expected return from stock N = $28,400 * 13.50% = $3,834.00
• Total expected return = $1,703.20 + $3,834.00 = $5,537.20
• Total investment = $17,200 + $28,400 = $45,600
• Expected return on the portfolio = Total expected return / Total investment
• Expected return on the portfolio = $5,537.20 / $45,600 = 0.1214, or 12.14%