Question

You have $64,000. You put 18% of your money in a stock with an expected return of 15%,$33,000 in a stock with an expected return of 14%, and the rest in a stock with an expected return of 18%. What is the expected return of your portfolio? The expected return of your portfolio is %. (Round to two decimal places.)

Answer 1

The expected return of the portfolio, calculated by weighting the returns of each stock by the proportion of the portfolio invested in each, is 15.40% when rounded to two decimal places.

Step-by-step explanation:

The expected return of your portfolio is calculated by weighting the returns of each stock by the proportion of the portfolio invested in each. First, we calculate the proportion of money not yet invested:

Total investment = $64,000

Amount invested at 18% = 18% of $64,000 = $11,520

Amount invested at 14% = $33,000

Amount remaining = $64,000 - ($11,520 + $33,000) = $19,480

Now we can calculate the expected return:

Expected return = (Proportion1 * Return1) + (Proportion2 * Return2) + (Proportion3 * Return3)

Proportion1 = $11,520 / $64,000

Proportion2 = $33,000 / $64,000

Proportion3 = $19,480 / $64,000

Expected return = (Proportion1 * 15%) + (Proportion2 * 14%) + (Proportion3 * 18%)

Expected return = ($11,520 / $64,000 * 15%) + ($33,000 / $64,000 * 14%) + ($19,480 / $64,000 * 18%)

Expected return = (0.18 * 15%) + (0.515625 * 14%) + (0.3046875 * 18%)

Expected return = 2.7% + 7.21875% + 5.484375%

Expected return = 15.403125%

Rounding to two decimal places, the expected return of the portfolio is 15.40%.

Answer 2

To calculate the expected return of your portfolio, multiply the amount invested in each stock by its expected return and sum up the values. Then divide the total by the total amount invested.

Step-by-step explanation:

To calculate the expected return of your portfolio, you can use a weighted average approach. Multiply the amount invested in each stock by its expected return, and then sum up these values. Finally, divide the total by the total amount invested in the portfolio.

Let's calculate:

1. 18% of $64,000 is $11,520
2. 14% of $33,000 is $4,620
3. The remaining amount is $64,000 - $11,520 - $4,620 = $47,860
4. 18% of $47,860 is $8,614.8

Now, sum up these values: $11,520 + $4,620 + $8,614.8 = $24,754.8

Finally, divide the sum by the total amount invested: $24,754.80 / $64,000 = 0.386

Therefore, the expected return of your portfolio is 38.6%.