Question

Security $ Invested Expected Return 1 $5,000 7% 2 $7,000 9% 3 $9,000 12% Give the data above: What is the weight of Security 1? (Show your work. Label %. One decimal place required. Highlight or bold your answer.) What is the weight of Security 2? (Show your work. Label %. One decimal place required. Highlight or bold your answer.) What is the weight of Security 3? (Show your work. Label %. One decimal place required. Highlight or bold your answer.) What is the expected return on the portfolio? (

Answer #1

**(1)-Weight of
Security 1**

Total Amount Invested = $21,000 [$5,000 + $7,000 + $9,000]

Weight of Security 1 = [Amount invested in Security 1 / Total Amount Invested] x 100

= [$5,000 / $21,000] x 100

= 23.8%

**(2)-Weight of
Security 2**

Weight of Security 2= [Amount invested in Security 1 / Total Amount Invested] x 100

= [$7,000 / $21,000] x 100

= 33.3%

**(3)-Weight of
Security 3**

Weight of Security 3 = [Amount invested in Security 1 / Total Amount Invested] x 100

= [$9,000 / $21,000] x 100

= 42.9%

**(4)-Expected Return
on the Portfolio**

Expected Return on the Portfolio = (Return on Security 1 x Weight of Security 1) + (Return on Security 2 x Weight of Security 2) + (Return on Security 3 x Weight of Security 3)

= [7% x 0.2380] + [9% x 0.333] + [12% x 0.429]

= 1.67% + 3.00% + 5.14%

= 9.81%

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