Question

What is the expected return of two-stock portfolio if you invest 30% of your investment into a stock with the expected return of 13% and 70% into a stock with the expected return of 8%? Round to the nearset hundredth percent. Answer in the percent format. Do not include % sign in your answer (i.e. If your answer is 4.33%, type 4.33 without a % sign at the end.)

Answer 1

Answer: The expected return on the portfolio is 9.5 percentage

Explanation:

Stock A

30% of the money is invested in Stock A that has an expected return of 13%

Stock B

70% of the money is invested in Stock B that has an expected return of 8%

In order to calculate the total expected return on the portfolio which consists of Stock A and Stock B, we should multiply the amount of money invested in each stock with its expected reutns. Then we sum up the values.

Expected Return of the Portfolio = (30%) (13%) + (70%) (8%) = 9.5%