Your portfolio has an expected return of 12.45% The portfolio includes two stocks. The first stock...

Question

Question

Your portfolio has an expected return of

12.45%

The portfolio includes two stocks. The first stock has a weight of

0.55

and the second has a weight of

0.45

If the expected return on the first stock is

12%,

then what is the expected return on the second stock in percentage terms?

The expected return on the second stock is

__%.

(Round to the nearest whole percent.)

Answer 1

Answer #1

Ans 13%

Let the return on second stock be X

Portfolio Expected Return =	Sum of Expected Return of all portfolios
Portfolio Expected Return =	Probab1 Return1 + Probab2 Return2
12.45% =	0.5512%+ 0.45X%
12.45% =	6.6% + 0.45*X%
X% =	(12.45%-6.6%)/ 0.45
X% =	0.13

X =	13%

Answer 2

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