Question

Assume IBM has the returns of 10%, 15%, 12%, 16%, and 18% over the past five...

Assume IBM has the returns of 10%, 15%, 12%, 16%, and 18% over the past five years. The corresponding returns for the S$P 500 are 8%, 12%, 11%, 13%, 14% and that you have 30% of your wealth invested in IBM and 70% invested in the S&P 500. What was your overall return over the past five years?

between 10% and 11%

between 11% and 12%

between 12% and 13%

between 13% and 14%

between 14% and 15%
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Answer #1
IBM S&P
1 10.00% 8.00%
2 15.00% 12.00%
3 12.00% 11.00%
4 16.00% 13.00%
5 18.00% 14.00%
Average= 14.20% 11.60%
Average or Mean = Sum of all observations/Count of all observations
Weight of IBM = 0.3
Weight of S&P = 0.7
Return of Portfolio = Weight of IBM*Return of IBM+Weight of S&P*Return of S&P
Return of Portfolio = 14.2*0.3+11.6*0.7
Return of Portfolio = 12.38

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