Question

You own a portfolio that has $1,600 invested in Stock A and $3,950 invested in Stock B. If the expected returns on these stocks are 10 percent and 16 percent, respectively, what is the expected return on the portfolio? Multiple Choice Ο 14.98% Ο 11.73% Ο 14.27

Answer 1

w1 = $1,600/($1,600 + $3,950) = 0.2883

porfeturn for =(w1 x r1) + (w2 x r2) + ... + (wn x rn) a Portfolio

w2 = $3,950/($1,600 + $3,950) = 0.7117

Expected Return = 0.2883 * 10% + 0.7117 * 16% = 14.27%