Math Problem Statement

Stock A has an expected return of 10% per year and Stock B has an expected return of 5%. If 40% of a portfolio's funds are invested in Stock A and the rest in Stock B, what is the expected return on the portfolio of Stock A and Stock B?

Group of answer choices

5%

1%

11%

7%

Solution

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Math Problem Analysis

Mathematical Concepts

Portfolio Management
Weighted Average
Expected Return

Formulas

Expected Return of Portfolio = (w_A * r_A) + (w_B * r_B)

Theorems

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Suitable Grade Level

Undergraduate Finance or Economics