Question

In: Finance

A portfolio consists of 43% of Stock A, with an average return of 8%, and the...

A portfolio consists of 43% of Stock A, with an average return of 8%, and the remainder Stock B with an average return of 13%. What is the average return of this portfolio?

Solutions

Expert Solution

Return on portfolio is weighted average of the return of the constituents.

In portfolio, weight of stock A = 43%

So, weight of stock B = 1 - 43% = 57%

Portfolio Return = Weight of Stock1 * Rate of Return of Stock1 + Weight of Stock2 * Rate of Return of Stock2 + ....+ Weight of Stockn * Rate of Return of Stockn

Portfolio Return = 43% * 8% + 57% * 13% = 3.44% + 7.41% = 10.85%

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

The Rate of Return for firms on the stock market is about 8% on average(the mean)...
The Rate of Return for firms on the stock market is about 8% on average(the mean) with a standard deviation of 6%. (A) What proportion of firms will earn a return between 5% and 10%? (B) To the nearest percent, find the probability of a firm earning 0% or less per year (i.e. not making money or losing money)? If there are 1,000 firms listed on the stock market, then how many firms will not make any money or lose...
2. A portfolio consists of $10,000 of stock A and $20,000 of stock B. Stock A...
2. A portfolio consists of $10,000 of stock A and $20,000 of stock B. Stock A has an expected return of 12% and a standard deviation of 14%, while stock B has an expected return of 10% and a standard deviation of 12%. a. Find the mean and standard deviation of the portfolio return (percentage form) when the correlation between the two stocks’ return is -1, 0, 1? (i got the answers for these but i want to be certain...
The return of a portfolio is normally distributed with a mean return of 8% and risk...
The return of a portfolio is normally distributed with a mean return of 8% and risk of 10%. What is the probability that this portfolio's return is between 18% and 27.6%?
Emmy is analyzing a two-stock portfolio that consists of a Utility stock and a Commodity stock....
Emmy is analyzing a two-stock portfolio that consists of a Utility stock and a Commodity stock. She knows that the return on the Utility stock has a standard deviation of 40 percent and the return on the Commodity stock has a standard deviation of 30 percent. However, she does not know the exact covariance in the returns of the two stocks. Emmy would like to plot the variance of the portfolio for each of three cases—covariance of 0.050, 0, and...
Emmy is analyzing a two-stock portfolio that consists of a Utility stock and a Commodity stock....
Emmy is analyzing a two-stock portfolio that consists of a Utility stock and a Commodity stock. She knows that the return on the Utility stock has a standard deviation of 40 percent and the return on the Commodity stock has a standard deviation of 30 percent. However, she does not know the exact covariance in the returns of the two stocks. Emmy would like to plot the variance of the portfolio for each of three cases—covariance of 0.115, 0, and...
Emmy is analyzing a two-stock portfolio that consists of a Utility stock and a Commodity stock....
Emmy is analyzing a two-stock portfolio that consists of a Utility stock and a Commodity stock. She knows that the return on the Utility stock has a standard deviation of 40 percent and the return on the Commodity stock has a standard deviation of 30 percent. However, she does not know the exact covariance in the returns of the two stocks. Emmy would like to plot the variance of the portfolio for each of three cases—covariance of 0.010, 0, and...
A portfolio consists of 60% of Security A (expected return of 0.10 and standard deviation of...
A portfolio consists of 60% of Security A (expected return of 0.10 and standard deviation of 0.03) and 40% of Security B (expected return of 0.20 and standard deviation of 0.05) and the correlation coefficient between A and B is -0.0012. a) Calculate the expected return and standard deviation of the portfolio. b) Calculate the standard deviation of the portfolio if there was no diversification benefit.
1. A portfolio consists of two securities and the expected return on them is 11% and...
1. A portfolio consists of two securities and the expected return on them is 11% and 15% respectively. What is the return on this portfolio if the first security constitutes of 45% of the total portfolio? a) 13% b) 13.2% c) 12.8% d) 12.2% 2. Acme Dynamite Company’s common stock has a beta of 1.60. The expected return on the market is 9%, and the risk-free rate is 5%. What is the required return on Acme’s common stock according to...
A portfolio consists of $15,000 in Stock M and $22,900 invested in Stock N. The expected...
A portfolio consists of $15,000 in Stock M and $22,900 invested in Stock N. The expected return on these stocks is 8.80 percent and 12.40 percent, respectively. What is the expected return on the portfolio? 11.69% 10.22% 10.98% 10.60% 9.37% You decide to invest in a portfolio consisting of 30 percent Stock A, 30 percent Stock B, and the remainder in Stock C. Based on the following information, what is the expected return of your portfolio? State of Economy Probability...
Suppose that you want to create a portfolio that consists of stock X and stock Y....
Suppose that you want to create a portfolio that consists of stock X and stock Y. For a​ $1,000 investment, the expected return for stock X is $ 71 and the expected return for stock Y is $ 102. The variance for stock X is 2,700 and the variance for stock Y is 8,625. The covariance of stock X and stock Y is 5,976. Complete parts​ (a) through​ (c). a.) Compute the portfolio expected return and portfolio risk if the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT