Question

beta numbers (1.1 for Apple and 0.8 for Microsoft), would you give me the "fake" return values for these stocks. And using those return values, would you please calculate the "fake" Portfolio Return.

	Amt Invested	Portfolio Weights	Expected Portfolio Return	Total Portfolio Value	Portfolio Beta
Microsoft	$333,000.00	0.33	1.60%		0.8
Apple	$670,000.00	0.67	1.90%		1.1
Both				$1,000,000.00

Yearly Stock Return
Year	Market	Microsoft	Apple
1	14.93%	-0.34%	3.86%
2	2.06%	-0.37%	2.09%
3	15.84%	0.40%	2.87%
4	32.21%	2.81%	0.38%
5	13.53%	1.91%	3.05%
6	1.34%	1.75%	-0.45%
7	11.80%	1.37%	1.24%
8	21.69%	2.72%	3.41%
9	-4.45%	1.41%	-0.33%
10	31.29%	4.06%	5.89%

Answer 1

Year	Market	Microsoft	Apple
1	14.93%	-0.34%	3.86%
2	2.06%	-0.37%	2.09%
3	15.84%	0.40%	2.87%
4	32.21%	2.81%	0.38%
5	13.53%	1.91%	3.05%
6	1.34%	1.75%	-0.45%
7	11.80%	1.37%	1.24%
8	21.69%	2.72%	3.41%
9	-4.45%	1.41%	-0.33%
10	31.29%	4.06%	5.89%
Average return	14.02%	1.57%	2.20%

Hence, use the return values as: 1.57% for Microsoft and 2.20% for Apple.

Expected portfolio return = w1 x R1 + w2 x R2 = 1/3 x 1.57% + 2/3 x 2.20% = 1.99%