Question

You own a portfolio consisting of the securities listed above. The expected return for each security is as shown. What is the expected return on the portfolio?

Stock W Number of Shares 300 450 100 575 Price per Share $11 19 48 33 Expected Return 8.9% 11.6% 28.4% 12.7% You own a portfolio consisting of the securities listed above. The expected return for each security is as shown. What is the expected return on the portfolio? 10.86 O 14.20 percent 19.23 peercent 11.23 percent

Answer 1

Step 1: Calculate percentage of each share in porfolio

SUM X v fx =B2*C2 A в C D Market Value of Share held 1 Stock Number of shares Price of share Expected Return = Price * Number of shares 2. W 300 8.90% =B2* C2 3 x 11.60% 8550 28.40% 4800 5 Z 575 12.70% 18975 Toal 35625 450 4 Y 100

SUM X v fx =E2/$E$6 A Market Value of Share held 1 Stock Number of shares Price of share Expected Return Percentage of share in Portfolio = Price * Number of shares 2 w 300 8.90% 3300= E2/$E$6 3 x 450 11.60% 8550 24% 4 Y 100 28.40% 4800 13% 5 Z 575 12.70% 18975 Toal 35625 100% 53%

1 F2 @ fx =E2/$E$6 Percentage of share in Portfolio 9% A B Market Value of Share held 1 Stock Number of shares Price of share Expected Return = Price * Number of shares 2w 300 8.90% 3300 3 x 450 11.60% 8550 4. Y T 100 48 28.40% 4800 5 Z 575 33 12.70% 18975 Toal 35625 19 24% 13% 53% 100%

Step 2: Expected Return = $\sum$ Weight of stock * Expected return of stock

Expected Return =

SUM X v fx =F2*D2 A B E Market Value of Share held 1 Stock Number of shares Price of share Expected Return Percentage of share in Portfolio Return by weight I= Price * Number of shares 2w 300 8.90% 3300 9% = F2 * D2 3 x 450 19] 11.60% 8550 24% 0.02784 4 Y 100 48 28.40% 4800 13% 0.038265263 22 zonel doo ranil noel

SUM ✓ fx =SUM(G2:55) A B Market Value of Share held 1 Stock Number of shares Price of share Expected Return Percentage of share in Portfolio Return by weight = Price * Number of shares 2. W 300 8.90% 3300 9% 0.008244211 3 X 450 19 1 1.60% 8550 24% 0.02784 4 Y 100 48 28.40% 4800 13% 0.038265263 5 Z 575 33 12.70% 18975 0.067644211 Toal 35625 100% =SUM(G2:55) <--- Portfolio Return 53% m + LONDO

C 69 B fx [ A B с D 1 Stock Number of shares Price of share Expected Return L 8 2 W 3 X 4 Y 5Z 300 450 100 575 11 19 48 33 Toal .90% 11.60% 28.40% 12.70% G H Market Value of Share held Percentage of share in Portfolio Return by weight = Price * Number of shares 3300 9.26% 0.008244211 8550 24.00% 0.02784 4800 13.47% 0.038265263 18975 53.26% 0.067644211 35625 100% 14.20% <--- Portfolio Return

Hence, correct is Option B - 14.20%