If you have $8,000 invested in each of two stocks whose expected rates of return are...

If you have $8,000 invested in each of two stocks whose expected rates of return are 9% and 11% respectively, $15,000 invested in a stock whose expected return is 10%, $20,000 invested in a stock whose return is 12%, and $10,000 invested in a stock whose return is 14%, what is the expected return on your portfolio?

Expert Solution

The return of a portfolio is the weighted average return of the securities which constitute the porfolio

Stock	Investment	Weight	Expected Return (%)	*WeightExpected Return**
1	8,000	0.13(8000/61000)	9	1.18
2	8,000	0.13(8000/61000)	11	1.44
3	15,000	0.25(15000/61000)	10	2.46
4	20,000	0.33(20000/61000)	12	3.93
5	10,000	0.16(10000/61000)	14	2.30

Total investment = 8000+8000+15000+2000+10000

= 61000

Portfolio Return = Weight*Expected Return

= 1.18+1.44+2.46+3.93+2.30

= 11.31%

jeff jeffy answered 7 months ago

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