Question

26 .S and T are two portfolios on the efficient frontier, the following table summarizes the weights of five stock in each portfolio: Stock Stock Weights for Portfolio S Stock Weights for Portfolio T Expected Return INTC 20% 20% 15% MRK 20% 30% 25% MSFT 30% 20% 10% APPL 15% 0% 8% JPM 15% 30% 14% a) Find the expected return of each portfolio. b) Ouday invests $500,000 in portfolio S and $800,000 in portfolio T. 1) What amount of his portfolio will be invested in each stock? 2) Find the expected return of Ouday’s portfolio.

please , i need the answer quickly , thank you ...

Answer 1

Expected Return on portfolio = Weights of stock in portfolio * expected return of the stocks

Stocks	Stock Weight for Portfolio S ( A)	Stock Weight for Portfolio T ( B)	Expected Return (C )	Expected Return on Portfolio S ( D = A*C)	Expected Return on Portfolio T ( D = B*C)
INTC	0.2	0.2	15	3.0	3.0
MRK	0.2	0.3	25	5.0	7.5
MSFT	0.3	0.2	10	3.0	2.0
APPL	0.15	0	8	1.2	0.0
JPM	0.15	0.3	14	2.1	4.2
Total -	14.3	16.7

Expected Return on Portfolio S = 14.3%

Expected Return on Portfolio T = 16.7%

Stock	Stock Weight for Portfolio S ( A)	Amount Invested by Ouday in each stock ( A * 500000)
INTC	0.2	$100,000
MRK	0.2	$100,000
MSFT	0.3	$150,000
APPL	0.15	$75,000
JPM	0.15	$75,000
Total	$500,000

Stock	Stock Weight for Portfolio T ( B)	Amount Invested by Ouday in each stock ( A * 500000)
INTC	0.2	$160,000
MRK	0.3	$240,000
MSFT	0.2	$160,000
APPL	0	$0
JPM	0.3	$240,000
Total	$800,000

Expected Return on Oudays Portfolio = (500000* 14.3 + 800000 *16.7 ) / ( 500000 +800000)

= ( 7150000 + 13360000) / 1300000

= 20510000 / 1300000

= 15.77%