You have $61,000. You put 24% of your money in a stock with an expected return...

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You have $61,000. You put 24% of your money in a stock with an expected return...

You have $61,000. You put 24% of your money in a stock with an expected return of 12%, $32,000 in a stock with an expected return of 13%, and the rest in a stock with an expected return of 22%. What is the expected return of your portfolio?

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Answer 1

Answer #1

Expected return of the Portfolio

The amount invested in the last stock = $61,000 – [$61,000 x 0.24] - $32,000

= $61,000 - $14,640 - $32,000

= $14,360

Therefore, the Expected return of the Portfolio = Sum[Returns x Percentage proportion of the amount invested]

= [12.00% x 0.24] + [13.00% x ($32,000 / $61,000)] + [22.00% x ($14,360 / $61,000)]

= [12.00% x 0.24] + [13.00% x 0.5246] + [22.00% x 0.2354]

= 2.88% + 6.82% + 5.18%

= 14.88%

“Hence, the Expected return of the Portfolio will be 14.88%”

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Answer 2

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