Question

Question Completion Status: 2 3 4 5 6 8 9 10 11 Q FEB 12 13 14 15 10 17 18 19 20 O ADG QUESTION 2 You allocated your money to a project containing 3 securities. The project provided you a return of 6.75%. If 33.5% of your money was invested in a security with 5% rate of return, and 9.1% was invested in a security with -3.8 % rate of return. What was your return on the third security? 9.44% 2.10% - 6.11% 0 - 8.19% 10.6% 07.18% QUESTION 3 Save A Click Save and Submit to save and submit. Click Save All Answers to save all answers.

Answer 1

Portfolio return = weighted average of the returns where the weights are proportion of total amount invested in individual securities

Weight of security 1 = 33.5% = 0.335

weight of security 2 = 9.1% = 0.091

Weight of security 3 = 1 - 0.335 - 0.091 = 0.574

Return on security 1 = 5%

return on security 2 = -3.8%

return on 3rd security = ??

6.75 = 0.335 * 5 + 0.091* - 3.8 + 0.574 * return of security 3

6.75 = 1.675 - 0.3458 + 0.574 * return on seurity 3

5.4208 = 0.574 * return on security 3

return on security 3 = 5.4208 / 0.574 = 9.44%