Question

What are the portfolio weights for a portfolio that has 135 shares of Stock A that sell for $71 per share and 95 shares of Stock B that sell for $84 per share? (Do not found intermediate calculations. Round your answers to 4 decimal places (e... 32.1616).) Portfolio weight Stock A Stock B

Answer 1

Solution:-

1)

Stock A = 135 shares *$71= $9585

Stock B = 95 shares *$84= $7980

Total = $9585 + $7980= $17,565

Weight of stock A = $9585/$17565= 0.5457

Weight of stock B =1-0.5457= 0.4543

2) Expected return = Total of ( probability * rate of return)

Expected return = ( .20* -.09) + (.50*.11) + (.30*.30)

Expected return = -0.018 + 0.055 + 0.09= 0.127 or 12.70%