Your superannuation fund comprises 200 units of the Diversified Large Industrials fund (DLI) and 100 shares of Cochlear (COH). The price of DLI is $130 and that of COH is $105. If you expect the return on DLI to be 9% in the next year and the return on COH to be 7%, what is the expected return for your retirement portfolio?

To calculate the expected return of the retirement portfolio, we need to determine the weight of each investment in the portfolio and apply the expected returns accordingly.

### Step 1: Calculate the total value of each investment
1. **DLI investment**:
   \[
   \text{Value of DLI} = 200 \times 130 = 26,000 \, \text{AUD}
   \]

2. **COH investment**:
   \[
   \text{Value of COH} = 100 \times 105 = 10,500 \, \text{AUD}
   \]

### Step 2: Calculate the total value of the portfolio
\[
\text{Total portfolio value} = 26,000 + 10,500 = 36,500 \, \text{AUD}
\]

### Step 3: Determine the weight of each investment in the portfolio
1. **Weight of DLI**:
   \[
   \text{Weight of DLI} = \frac{26,000}{36,500} = 0.7123
   \]

2. **Weight of COH**:
   \[
   \text{Weight of COH} = \frac{10,500}{36,500} = 0.2877
   \]

### Step 4: Calculate the expected return for the portfolio
\[
\text{Expected portfolio return} = (0.7123 \times 9\%) + (0.2877 \times 7\%)
\]
\[
\text{Expected portfolio return} = (0.7123 \times 0.09) + (0.2877 \times 0.07) = 0.0641 + 0.0201 = 0.0842 = 8.42\%
\]

### Conclusion:
The expected return for your retirement portfolio is **8.42%**.

Would you like more details or have any questions?

---

Here are 5 related questions:
1. How do changes in the expected returns affect the overall portfolio return?
2. How would the portfolio's expected return change if the proportion of DLI and COH were different?
3. What would be the expected return if the return on COH increased to 10%?
4. How does diversification reduce risk in a portfolio like this?
5. What is the impact of increasing your investment in COH on the portfolio's risk?

**Tip:** To improve diversification, consider adding assets with low correlation to your existing investments.

Learn how to calculate the expected return of a retirement portfolio with investments in the Diversified Large Industrials fund (DLI) and Cochlear (COH). This example includes calculating total investment value, weighting each investment, and applying expected returns. Suitable for finance students or investors looking to understand portfolio returns.

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