Question

Fremont Enterprises has an expected return of 12 % and Laurelhurst News has an expected return of 24 %. If you put 56 % of your portfolio in Laurelhurst and 44 % in​ Fremont, what is the expected return of your​ portfolio?

Answer 1

= 18.7%

Step-by-step explanation:

A portfolio is a collection of assets/ investment. The return on a portfolio is the weighted average of all the return of the individual assets weighted according to the percentage of total funds allocated to each assets.

Expected return on portfolio:

E(R) =( Wa*Ra) + (Wb*Rb)

Wa = 56% , Wb = 100-56 = 44%

Ra = 12%, Rb = 24%

E(R) = (0.56*24%) + (0.44× 12%)

= 18.7%