Question

Question 2 7 pts You buy 100 shares of Apple stock at $2 and 200 shares of Boeing stock at $3. Over the next year, your investment in Apple has 2% total return, while your investment in Boeing as 1% total return. What is your portfolio return for the year? Do not round at intermediate steps in your calculation. Express your answer in percent. Round to two decimal places. Do not type the % symbol. If the return is negative, then include a minus sign.

Answer 1

There are 100 shares of Apple at $2 and there are 200 shares of Boeing at $3

Amount invested in Apple stock = $2*100 = 200

Amount invested in Boeing stock = $3*200 = 600

Total amount invested in the portfolio = 200 + 600 = 800

Weight of Apple stock in the portfolio = WA = Amount invested in Apple/Total amount invested in the portfolio = 200/800 = 25%

Weight of Boeing stock in the portfolio = WB = Amount invested in Boeing/Total amount invested in the portfolio = 600/800 = 75%

Return on Apple = RA = 2%

Return on Boeing = RB = 1%

Expected return of the portfolio is calculated using the formula:

Portfolio Return = E[RP] = WA*RA + WB*RB = 25%*2% + 75%*1% = 1.25%

Answer (%) -> 1.25