Tim sets up a portfolio of two stocks: stock X and stock Y. Heplans to...

Tim sets up a portfolio of two stocks: stock X and stock Y. He plans to put 40% of the funding in Stock X, and the rest in Stock Y. If Stock X’s return is 15%, whereas stock Y’s return is 22%, Calculate his portfolio return (rp). (you MUST show your work to earn ANY credit)

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Expert Solution

Funds in stock X = 40%

Funds in stock Y = 100% - 40% = 60%

Return on stock X = 15%

Return on stock Y = 22%

Portfolio return = Weight of X x Return on X + Weight of Y x Return on Y

Portfolio return = 0.40 x 15% + 0.60 x 22%

Portfolio return = 6.4% + 13.2% = 19.6%

jeff jeffy answered 2 years ago

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