Question

Suppose you invest​ $20,000 by purchasing 200 shares of Abbott Labs​ (ABT) at​ $50 per​ share, 200 shares of Lowes​ (LOW) at​ $30 per​ share, and 100 shares of Ball Corporation​ (BLL) at​ $40 per share. Suppose over the next year Ball has a return of ​%, Lowes has a return of ​%, and Abbott Labs has a return of . The return on your portfolio over the year​ is:

Answer 1

3.8%

Step-by-step explanation:

There are some important parts missing:

Suppose over the next year Ball has a return of 12.5%, Lowes has a return of 21%, and Abbott Labs has a return of -10%.

We must first determine the weight of each stock in the portfolio:

• ABT = ($50 x 200) / $20,000 = 50%
• LOW = ($30 x 200) / $20,000 = 30%
• BLL = ($40 x 100) / $20,000 = 20%

the expected return of the portfolio = (ABT x return) + (LOW x return) + (BLL x return) = (50% x -0.1) + (30% x 0.21) + (20% x .125) = -5% + 6.3% + 2.5% = 3.8%