Question

You own a portfolio that has 4,800 shares of stock A, which is priced at 15.4...

You own a portfolio that has 4,800 shares of stock A, which is priced at 15.4 dollars per share and has an expected return of 6.71 percent, and 3,800 shares of stock B, which is priced at 24.6 dollars per share and has an expected return of 16.07 percent. The risk-free return is 3.28 percent and inflation is expected to be 2.4 percent. What is the expected real return for your portfolio? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

Homework Answers

Answer #1

Answer:
Stock A:

Number of Shares = 4,800
Value per Share = $15.40
Value of Stock A = 4,800 * $15.40
Value of Stock A = $73,920

Stock B:
Number of Shares = 3,800
Value per Share = $24.60
Value of Stock A = 3,800 * $24.60
Value of Stock A = $93,480

Total Value of Portfolio = $73,920 + $93,480
Total Value of Portfolio = $167,400

Weight of Stock A = $73,920 / $167,400
Weight of Stock A = 0.4416

Weight of Stock A = $73,920 / $167,400
Weight of Stock A = 0.4416

Weight of Stock B = $93,480 / $167,400
Weight of Stock B = 0.5584

Portfolio Return = (0.4416 * 6.71%) + (0.5584 * 16.07%)
Portfolio Return = 11.94%

Real Return = (Portfolio Return – Inflation Rate) / (1 + Inflation Rate)
Real Return = (0.1194 – 0.024) / (1 + 0.024)
Real Return = 0.0954 / 1.024
Real Return = 9.32%

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You own a portfolio that has 6,400 shares of stock A, which is priced at 14.4...
You own a portfolio that has 6,400 shares of stock A, which is priced at 14.4 dollars per share and has an expected return of 15.62 percent, and 1,300 shares of stock B, which is priced at 24.6 dollars per share and has an expected return of 5.49 percent. The risk-free return is 3.81 percent and inflation is expected to be 1.93 percent. What is the risk premium for your portfolio? Answer as a rate in decimal format so that...
You own a portfolio that has 4,100 shares of stock A, which is priced at 17.1...
You own a portfolio that has 4,100 shares of stock A, which is priced at 17.1 dollars per share and has an expected return of 8.32 percent, and 3,700 shares of stock B, which is priced at 27.4 dollars per share and has an expected return of 12.13 percent. The risk-free return is 3.33 percent and inflation is expected to be 2.33 percent. What is the expected real return for your portfolio? Answer as a rate in decimal format so...
You own a portfolio that has 4,400 shares of stock A, which is priced at 13.8...
You own a portfolio that has 4,400 shares of stock A, which is priced at 13.8 dollars per share and has an expected return of 4.79 percent, and 3,300 shares of stock B, which is priced at 26.3 dollars per share and has an expected return of 16.86 percent. The risk-free return is 3.21 percent and inflation is expected to be 2.01 percent. What is the expected real return for your portfolio? Answer as a rate in decimal format so...
You own a portfolio that has 6,700 shares of stock A, which is priced at 18.1...
You own a portfolio that has 6,700 shares of stock A, which is priced at 18.1 dollars per share and has an expected return of 6.32 percent, and 1,800 shares of stock B, which is priced at 28.8 dollars per share and has an expected return of 16.35 percent. The risk-free return is 3.41 percent and inflation is expected to be 2.43 percent. What is the expected real return for your portfolio? Answer as a rate in decimal format so...
You own a portfolio that has 5,900 shares of stock A, which is priced at 15.2...
You own a portfolio that has 5,900 shares of stock A, which is priced at 15.2 dollars per share and has an expected return of 5.27 percent, and 1,000 shares of stock B, which is priced at 22.1 dollars per share and has an expected return of 14.19 percent. The risk-free return is 3.79 percent and inflation is expected to be 2.05 percent. What is the expected real return for your portfolio? Answer as a rate in decimal format so...
You own a portfolio that has 5,000 shares of stock A, which is priced at 13...
You own a portfolio that has 5,000 shares of stock A, which is priced at 13 dollars per share and has an expected return of 12.5 percent, and 2,700 shares of stock B, which is priced at 22.1 dollars per share and has an expected return of 7.05 percent. The risk-free return is 3.91 percent and inflation is expected to be 1.27 percent. What is the risk premium for your portfolio? Answer as a rate in decimal format so that...
You own a portfolio that has 6,000 shares of stock A, which is priced at 15.5...
You own a portfolio that has 6,000 shares of stock A, which is priced at 15.5 dollars per share and has an expected return of 15.37 percent, and 2,000 shares of stock B, which is priced at 20.5 dollars per share and has an expected return of 6.84 percent. The risk-free return is 2.71 percent and inflation is expected to be 1.97 percent. What is the risk premium for your portfolio? Answer as a rate in decimal format so that...
You own a portfolio that has a total value of 131,000 dollars. The portfolio has 5,000...
You own a portfolio that has a total value of 131,000 dollars. The portfolio has 5,000 shares of stock A, which is priced at 8 dollars per share and has an expected return of 11.98 percent. The portfolio also has 20,000 shares of stock B, which has an expected return of 16.75 percent. The risk-free return is 5.26 percent and inflation is expected to be 2.42 percent. What is the risk premium for your portfolio? Answer as a rate in...
You own a portfolio that has a total value of 126,000 dollars. The portfolio has 6,000...
You own a portfolio that has a total value of 126,000 dollars. The portfolio has 6,000 shares of stock A, which is priced at 7.3 dollars per share and has an expected return of 8.62 percent. The portfolio also has 10,000 shares of stock B, which has an expected return of 14.46 percent. The risk-free return is 4.68 percent and inflation is expected to be 2.38 percent. What is the risk premium for your portfolio? Answer as a rate in...
13Your investment portfolio has 15,000 shares of Fairfax Paint, which has an expected return of 5.67...
13Your investment portfolio has 15,000 shares of Fairfax Paint, which has an expected return of 5.67 percent and a price of 7.2 dollars per share, and 20,000 shares of Litchfield Design, which has a price of 2.6 dollars per share. If your portfolio has an expected return of 8.66 percent, then what is the expected return for Litchfield Design? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT