Portfolio return for the month is 1.17%.
To calculate your portfolio return, you need to weigh the returns of each investment by the initial amount you owned in each and then sum them up. Here are the step-by-step calculations:
Step 1: Calculate the return for each investment.
- General Dynamics return: 7.44%
- Starbucks return: -1.36%
- Nike return: -0.54%
Step 2: Calculate the weighted returns for each investment.
Weighted return for General Dynamics:
(Initial investment in General Dynamics / Total initial investment) * General Dynamics return
= ($5,500 / ($5,500 + $7,500 + $8,000)) * 7.44%
= (5500 / 21000) * 7.44%
= 0.2619 * 7.44%
= 1.95%
Weighted return for Starbucks:
(Initial investment in Starbucks / Total initial investment) * Starbucks return
= ($7,500 / ($5,500 + $7,500 + $8,000)) * -1.36%
= (7500 / 21000) * -1.36%
= 0.3571 * -1.36%
= -0.49%
Weighted return for Nike:
(Initial investment in Nike / Total initial investment) * Nike return
= ($8,000 / ($5,500 + $7,500 + $8,000)) * -0.54%
= (8000 / 21000) * -0.54%
= 0.3809 * -0.54%
= -0.29%
Step 3: Sum up the weighted returns for all investments to find the portfolio return.
Portfolio return = Weighted return for General Dynamics + Weighted return for Starbucks + Weighted return for Nike
= 1.95% + (-0.49%) + (-0.29%)
= 1.17%
So, The answer is 1.17%.
The complete question is here:
At the beginning of the month, you owned $5,500 of General Dynamics, $7,500 of Starbucks, and $8,000 of Nike. The monthly returns for General Dynamics, Starbucks, and Nike were 7.44 percent, –1.36 percent, and –0.54 percent. What is your portfolio return? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)