Question

You buy 100 shares of Apple stock at $8 and 200 shares of Boeing stock at $4. Over the next year, your investment in Apple has 4% total return, while your investment in Boeing as 2% total return. What is your portfolio return for the year? Do not round at intermediate steps in your calculation. Express your answer in percent. Round to two decimal places. Do not type the % symbol. If the return is negative, then include a minus sign.

Answer 1

Portfolio return for the year

Amount invested in Apple Stock = $800 [100 shares x $8.00 per share]

Amount invested in Boeing Stock = $800 [100 Shares x $8.00 [er share]

Total Amount invested = $1,600 [$800 + $800]

The Portfolio return for the year = [Return for Apple Stock x Proportion of amount invested in Apple Stock] + [Return for Boeing Stock + Proportion of amount invested in Boeing Stock]

= [4.00% x ($800/$1,600)] + [2.00% x ($800/$1,600)]

= [4.00% x 0.50] + [2.00% x 0.50]

= 2.00% + 1.00%

= 3.00%

“Hence, the Portfolio return for the year will be 3.00%”