Homework Answers
| Expected return on the given portfolio= |
| Sum of (Proportional $ Weights of individual investment* Their Expected returns) |
| ie. (Wt.Sand Corpn.shares*ER(SC))*(Wt.Water Corpn.shares*ER(WC))*(Wt. Beach Corpn.shares*ER(BC)) |
| Total $ investment= 4000+5000+6000= |
| 15000 |
| Wt. of Sand Corporation shares in the total portfolio=4000/15000= 4/15 |
| Wt. of Water Corporation shares in the total portfolio=5000/15000= 5/15 |
| Wt. of Beach Corporation shares in the total portfolio=6000/15000= 6/15 |
| Now, |
| the Expected return on the given portfolio=(4/15*12%)+(5/15*13%)+(6/15*15%)= |
| 13.53% |
| So, the ANSWER is |
| C. 13.5% |
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