Question

You've invested $3,300 in Stock Arbuckle and $4,300 invested in Stock Roscoe. The expected returns on these stocks are 11 percent and 14 percent, respectively. Calculate the expected return on the portfolio. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Portfolio expected return % is ____.

Answer 1

Amount invested in stock Arbuckle=$3,300
Amount invested in stock Roscoe=$4,300
Expected returns on stock Arbuckle=11%
Expected returns on stock Roscoe=14%

Total amount=$3,300+$4,300=$7600
Percentage of the amount invested in stock Arbuckle=$3,300/$7600=0.434210526 or 43.42% (Rounded to two decimal places)
Percentage of the amount invested in stock Roscoe=$4,300/$7600=0.565789474 or 56.58% (Rounded to two decimal places)

Expected return on the portfolio=(Percentage of the amount invested in stock Arbuckle)*(Expected returns on stock Arbuckle)+ (Percentage of the amount invested in stock Roscoe)*(Expected returns on stock Roscoe)
=0.434210526*11%+0.565789474*14%
=0.047763158+0.079210526
Portfolio expected return =0.126973684 or 12.70% (Rounded to two decimal places)