Question

A portfolio is consisted of two stocks:$1,000 in stock X and $3,500 in stock Y. The expected return on stock X is 12%, and 6% for stock Y. What is the expected rate of return of this portfolio

Answer 1

Portfolio return = 7.3%

Step-by-step explanation:

The portfolio expected rate of return would be the weighted average expected rate of return

Weighted average expected rate of return=

12%× (1000/(3500+1000) + (3,500/(1000+3500)× 6%= 0.073333333

Expected rate of return = 0.073333333 × 100 = 7.3%

Portfolio return = 7.3%