Question

suppose your investment budget is $100,000. in addition, you borrow an additional $30,000 and invest the total available funds of $130,000 in stock a. if the expected rate of return of stock a is 13%, and you borrow at 6%, what is your expected portfolio return?

Answer 1

The expected portfolio return when the investment budget is $100,000. in addition to an additional $30,000 borrowed is 15.1%.

How to calculate the portfolio return?

Based on the information, the expected portfolio return will be:

= (Amount invested in stock A / investment budget) × return on stock A - (Amount borrowed / investment budget ) × borrowing rate

= (130000 / 100000) × 13% - (30000 / 100000) × 6%

= (1.3 × 0.13) - (0.3 × 0.06)

= 16.9% - 1.8%

= 15.1%

In conclusion, the expected portfolio return is 15.1%.

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