Question

You own a portfolio that has $2,200 invested in Stock A and $3,550 invested in Stock B. If the expected returns on these stocks are 10 percent and 17 percent, respectively, what is the expected return on the portfolio? (Do not round your intermediate calculations.)

A. 15.04%

B. 13.50%

C. 14.32%

D. 12.68%

E. 14.61%

Answer 1

C. 14.32%

Step-1:Calculation of weight of investments
Investment in :
Stock A		$       2,200
Stock B		$       3,550
Total		$       5,750
So, weight of :
Stock A		$       2,200	/	$    5,750	=	0.3826
Stock B		$       3,550	/	$    5,750	=	0.6174
Total						1.0000
Step-2:Calculation of expected return on portfolio
			weight	return
			a	b	a*b
Stock A			0.3826	10%	3.83%
Stock B			0.6174	17%	10.50%
Portfolio's return					14.32%