Business, 15.10.2019 20:30 angeline2004

Assume that you have $330,000 invested in a stock that is returning 11.50%, $170,000 invested in a stock that is returning 22.75%, and $470,000 invested in a stock that is returning 10.25%. what is the expected return of your portfolio? select one:
a. 12.9%
b. 18.3%
c. 15.6%
d. 14.8%

Answers: 2

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Answer from: mak6156

Option (a) is correct.

Explanation:

Investments:

Stock A = $330,000

Stock B = $170,000

Stock C = $470,000

Returns(R):

Stock A = 11.50%

Stock B = 22.75%

Stock C = 10.25%

Total investment = $330,000 + $170,000 + $470,000

= $970,000

Weight for stock A = $\frac{Investment}{Total\ investment}$

= $\frac{330,000}{970,000}$

= 34.02%

Weight for stock B = $\frac{Investment}{Total\ investment}$

= $\frac{170,000}{970,000}$

= 17.53%

Weight for stock C = $\frac{Investment}{Total\ investment}$

= $\frac{470,000}{970,000}$

= 48.45%

Portfolio return for stock A = Weight for stock A × R of stock A

= 34.02% × 11.50%

= 3.91%

Portfolio return for stock B = Weight for stock B × R of stock B

= 17.53% × 22.75%

= 3.99%

Portfolio return for stock C = Weight for stock C × R of stock C

= 48.45% × 10.25%

= 4.97%

Expected return of portfolio:

= Portfolio return for stock A + Portfolio return for stock B + Portfolio return for stock C

= 3.91% + 3.99% + 4.97%

= 12.87%

= 12.9%

Answer from: Quest

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Answer from: Quest

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