Question

You have compiled the following information on your investments. What rate of return should you expect to earn on this portfolio? Stock Number of Shares 500 Price per share $51 66 42 29 Expected Return 13.6% 14.8% 7.5% 2.1% 200 300 250

Answer 1

Answer is 11.13%

Expected return of a portfolio is weighted average return of individual constituents.

А В C E F G Number Price per Expected Value of Weighted Stock 1 of shares share Shares Return return 2 A 13.60% $25,500 14.80% $13,200 7.50% $12,600 $51 5.92% 500 3 в $66 3.34% 200 $42 4 C 1.61% 300 $29 $7,250 5 D 250 2.10% 0.26% 6 11.13% Expected Return 7

A B D E F G Number of shares Stock Price per share Value of Shares Weighted return Expected Return 1 (E2/SUM($E$2:$E$5))*D2 2 A -B2*C2 500 51 0.136 - (E3/SUM(SE$2:$E$5))* D3 3 B 0.148 =B3*C3 200 66 (E4/SUM($E$2:$E$5))*D4 - (E5/SUM(SE$2:$E$5))* D5 SUM(F2:F5) 4 B4*C4 300 42 0.075 5 =B5*C5 250 29 0.021 6 Expected Return 7