Problem 11-2 Portfolio Expected Return [LO 1] You own a portfolio that has $2,40
ID: 2646971 • Letter: P
Question
Problem 11-2 Portfolio Expected Return [LO 1]
You own a portfolio that has $2,400 invested in Stock A and $3,500 invested in Stock B. Assume the expected returns on these stocks are 8 percent and 14 percent, respectively.
What is the expected return on the portfolio? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
You own a portfolio that has $2,400 invested in Stock A and $3,500 invested in Stock B. Assume the expected returns on these stocks are 8 percent and 14 percent, respectively.
Explanation / Answer
Proportion of stock A = 2400 / 2400+3500 = 0.4068
Proportion of stock B = 3500 / 2400+3500 = 0.5932
Therefore expected retrun = 0.4068(8%)+0.5932(14%) = 11.5592=11.56%
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