You own a portfolio that has $3,700 invested in Stock A and $4,700 invested in S

Question

You own a portfolio that has $3,700 invested in Stock A and $4,700 invested in Stock B. If the expected returns on these stocks are 9 percent and 12 percent, respectively, what is the expected return on the portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

You own a portfolio that has $3,700 invested in Stock A and $4,700 invested in Stock B. If the expected returns on these stocks are 9 percent and 12 percent, respectively, what is the expected return on the portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

Answer

Stock     Expected return               Weight                 Expected Return * Weights

(A) (B)                          (A*B)

A             9% 3700                       333        

B             12% 4700                       564

Expected return on the portfolio = Expected Return * Weights / Total weight

= (333 + 564)/(3700+4700)

= 10.68%.

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