Given the following forecasts, what is the expected return for a portfolio that has $1,500 invested in Stock A and $4,500 invested in Stock B?

A)12.0%
B)12.5%
C)14.0%
D)14.2%

Question

Given the following forecasts, what is the expected return for a portfolio that has $1,500 invested in Stock A and $4,500 invested in Stock B?

A)12.0% 
B)12.5% 
C)14.0% 
D)14.2%

Quizplus · Accepted Answer

Expected return for Stock A = 8% x $1,500 = $120

Expected return for Stock B = 18% x $4,500 = $810

Total expected return for the portfolio = $120 + $810 = $930

Portfolio return = Total expected return / Total investment = $930 / $6,000 = 0.155 = 15.5%

Therefore, the expected return for the portfolio is 14.0%.

Given the Following Forecasts, What Is the Expected Return for a Portfolio