Toyota Corp.'s stock is $30 per share. Its expected return is 21% and variance is 13%....
Toyota Corp.'s stock is $30 per share. Its expected return is 21% and variance is 13%. Honda Corp.'s stock is $21 per share. Its expected return is 16% and variance is 4%. Benz Corp.'s stock is $40 per share. Its expected return is 11% and variance 7%. What would be the expected return of a portfolio consisting of 50% Toyota and 50% Honda?
Homework Answers
What would be the expected return of a portfolio consisting of 50% Toyota and 50% Honda?
The return of a portfolio is the weighted average return of the securities which constitute the porfolio
| Stock | Weight | Expected Return (%) | Weight*Expected Return |
| Toyota | 0.50 | 21 | 10.50 |
| Honda | 0.50 | 16 | 8.00 |
Portfolio Return = Weight*Expected
Return
= 10.50+8
= 18.50%
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