You own a portfolio that has $1,500 invested in Stock A and $500
invested in Stock...
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You own a portfolio that has $1,500 invested in Stock A and $500invested in Stock B. If the expected returns are 10% for Stock Aand 14% for Stock B, what is the expected return on theportfolio?
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Portfolio value= $1,500 + $500= $2,000
Weight of stock A= $1,500/ $2,000
= 0.75*100
= 75%
Weight of stock B= $500/ $2,000
= 0.25*100
= 25%
Expected return of the portfolio= Weight in the
portfolio*Expected return
=
0.75*10% + 0.25*14%
= 7.50% + 3.50%
= 11%.
In case of any query, kindly comment on the solution.
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