19. You own a portfolio that has $2,000 invested in Stock A and $3,500 invested
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Question
19. You own a portfolio that has $2,000 invested in Stock A and $3,500 invested in Stock B. The expected returns on these stocks are 14 percent and 9 percent, respectively. What is the expected return on the portfolio? 19. You own a portfolio that has $2,000 invested in Stock A and $3,500 invested in Stock B. The expected returns on these stocks are 14 percent and 9 percent, respectively. What is the expected return on the portfolio? 19. You own a portfolio that has $2,000 invested in Stock A and $3,500 invested in Stock B. The expected returns on these stocks are 14 percent and 9 percent, respectively. What is the expected return on the portfolio?Explanation / Answer
Total Investment = 2000+3500 i.e 5500
Weight of stock A = 2000/5500 i.e 0.36
Weight of stock B = 3500/5500 i.e 0.64
Return on portfolio = ( 14*0.36) + ( 9*0.64)= 10.82%
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