You have the following information about your stock portfolio. You own 9 ,000 shares of Stock A which sells for $ 14 with an expected return of 6 %. You own 2,000 shares of Stock B which sells for $10 with an expected return of 6%. You own 4,000 shares of Stock C which sells for $12 with an expected return of 9%. You own 2 ,000 shares of Stock D which sells for $ 16 with an expected return of 9 %. What is the expected return on your portfolio? Show your answer to the nearest .01%.

7.06%

Explanation:

We will work this through a weighted-average approach:

Stock SharesPriceValueWeight

A  9000$14$1260000.557522124 (126,000/226,000)

B  2000$10  $20000  0.088495575(20,000/226,000)

C  4000$12  $48000   0.212389381(48,000/226,000)

D  2000$16$32000   0.14159292(32,000/226,000)

          $2260001

Then we aply that weight to each stock return

StockReturnWeighted return

A0.060.033451327

B0.060.005309735

C0.090.019115044

D0.090.012743363

          0.070619469

The estimated return will be of 7.06%

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