Question

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

Answer 1

Answer:

the expected return on the portfolio is 10.98%

Explanation:

The computation of the expected return is shown below;

Return on Stock M = $15,000 × 8.8% = $1,320  

Return on Stock N = $22,900 × 12.40% = $2,840

Now  

Portfolio return is

= ($1,320 + $2,840 ) ÷ ($37,900)

= 10.98%

The $37,900 comes from

= $15,000 + $22,900

= $37,900

hence, the expected return on the portfolio is 10.98%