Question

Suppose that you have 25% invested in each of Ball Corporation, Lowes Corporation, Abbott Labs and Treasury Securities. If over the next year Ball Corporation has a return of 12.5%, Lowes Companies has a return of - 20%, Abbott Labs has a return of 10% and Treasuries return 5%.

What is the return on your portfolio over the year? Show your work

Answer 1

The return on your portfolio over the year is computed as shown below:

= Amount invested in Ball Corporation x Return in Ball Corporation + Amount invested in Lowes Corporation x Return in Lowes Corporation + Amount invested in Abbott Labs x Return in Abbott Labs + Amount invested in Treasury Securities x Return in Treasury Securities

= 0.25 x 0.125 + 0.25 x - 0.20 + 0.25 x 0.10 + 0.25 x 0.05

= 1.875%

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