Answer: 13.75% ; 16.48%
Step-by-step explanation:
Year 0:
Microsoft: Current value = 100 at $37 = $3700
Apple: Current value = 100 at $43 = $4300
Portfolio value = $3700 + $4300 = $8000
Year 1:
Microsoft: value at year 1 = 100 at $42 = $4200
Apple: value at year 1= 100 at $49 = $4900
Portfolio value = $4200 + $4900 = $9100
Year 2:
Microsoft: value at year 2 = 100 at $47 = $4700
Apple: value at year 2 = 100 at $59 = $5900
Portfolio value = $4700 + $5900 = $10600
Therefore, Portfolio returns for year 1 will be:
= (value at the end of year 1 / current value) - 1
= (9100 / 8000) - 1
= 1.1375 - 1
= 0.1375
= 13.75%
Portfolio returns for year 2 will be:
= (value at the end of year 2 / value at the end of year 1) - 1
= (10600 / 9100) - 1
= 16.48%