Question

Your retirement portfolio comprises 100 shares of the Standard & Poor's 500 fund (SPY) and 100 shares of Shares Barclays Aggregate Bond Fund (AGG). The price of SPY is $118 and that of AGG is $99. If you expect the return on SPY to be 10% in the next year and the return on AGG to be 5%, what is the expected return for your retirement portfolio? OA 6.56% OB. 8.88% OC. 772% OD. 6.95%

Answer 1

Value of S{Y = 100*$118 =11800
AGG = 100*$99 =9900
Expected Return of the portfolio
Stock	Invesetment	Weight	Expected return	Expected return on portfolio
a	b	c=b/21700	d	e=c*d
SPY	$ 11,800	0.54	10.00%	5.44%
AGG	$    9,900	0.46	5.00%	2.28%
Total	$ 21,700	1		7.72%
Correct Answer = C.7.72%