You own a portfolio that has $1,400 invested in Stock A and $1,900 invested in S

Question

You own a portfolio that has $1,400 invested in Stock A and $1,900 invested in Stock B. If the expected returns on these stocks are 11 percent and 13 percent, respectively, the expected return on the portfolio is percent. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))

You own a portfolio that has $1,400 invested in Stock A and $1,900 invested in Stock B. If the expected returns on these stocks are 11 percent and 13 percent, respectively, the expected return on the portfolio is percent. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

You own a portfolio that has $1,400 invested in Stock A and $1,900 invested in Stock B. If the expected returns on these stocks are 11 percent and 13 percent, respectively, the expected return on the portfolio is 12.15 percent.

Calculation:

The expected return on the portfolio = Weight of Stock A * expected returns of Stock A + Weight of Stock B * expected returns of Stock B

The expected return on the portfolio = 1400/(1400+1900) * 11 + 1900/(1400+1900) * 13

The expected return on the portfolio = 12.15%

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