You own a portfolio that has $3,200 invested in Stock A and $4,300 invested in S

Question

You own a portfolio that has $3,200 invested in Stock A and $4,300 invested in Stock B. Assume the expected returns on these stocks are 12 percent and 18 percent, respectively.

What is the expected return on the portfolio? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

You own a portfolio that has $3,200 invested in Stock A and $4,300 invested in Stock B. Assume the expected returns on these stocks are 12 percent and 18 percent, respectively.

Explanation / Answer

Amount invested in stock A =$3200

Amount invested in stock B =$4300

Total Investment =$3200+$4300 i.e 7500

Therefore expected return on portfolio =( Amount invested in stock A/Total Amount invested )*Expected return of stock A+(Amount Invested in stock B/Total Amount invested)*Expected return of stock B

=(3200/7500)*0.12+(4300/7500)*0.18

=15.40% is the expected return of portfolio

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