A portfolio consists of 18200 in Stock M and 30900 invested

A portfolio consists of $18,200 in Stock M and $30,900 invested in Stock N. The expected return on these stocks is 10.40 percent and 14.30 percent, respectively. What is the expected return on the portfolio? 13.58% 11.85% 12.85% 10.86% 12.35%

Solution

Total investment=(18200+30900)=$49100

Hence expected return of portfolio=Respective return*Respective weights

=(18200/49100*10.4)+(30900/49100*14.30)

=12.85%(Approx).