Question

g Suppose you invest $15,000 in Merck stock and $25,000 in Home Depot stock. You expect a return of 16% for Merck and 12% for Home Depot. What is the expected return on your portfolio?

Answer 1

Answer: 13.5%

Step-by-step explanation:

From the question, we are informed that an individual invest $15,000 in Merck stock and $25,000 in Home Depot stock and expect a return of 16% for Merck and 12% for Home Depot.

The expected return on the portfolio will be:

= [($15,000/$40,000) × 16%] + [($25,000/$40,000) × 12%]

= (0.375 × 0.16) + (0.625 × 0.12)

= 0.06 + 0.075

= 0.135

= 13.5%