Math Problem Statement

If you invested $30,000 in Disney and $10,000 in Oracle and the two companies returned 6 percent and 12 percent respectively, what was your portfolio's return?

Solution

To calculate the overall return of the portfolio, you need to determine the weighted average return, taking into account the different amounts invested in Disney and Oracle.

Here's how you can calculate it:

1. Calculate the individual returns:

  • Disney:
    Investment: $30,000
    Return: 6%
    Dollar return from Disney:
    0.06×30,000=1,800 dollars0.06 \times 30{,}000 = 1{,}800 \text{ dollars}

  • Oracle:
    Investment: $10,000
    Return: 12%
    Dollar return from Oracle:
    0.12×10,000=1,200 dollars0.12 \times 10{,}000 = 1{,}200 \text{ dollars}

2. Calculate the total dollar return:

1,800+1,200=3,000 dollars1{,}800 + 1{,}200 = 3{,}000 \text{ dollars}

3. Calculate the total investment:

30,000+10,000=40,000 dollars30{,}000 + 10{,}000 = 40{,}000 \text{ dollars}

4. Calculate the portfolio's return:

Portfolio Return=Total Dollar ReturnTotal Investment=3,00040,000=0.075=7.5%\text{Portfolio Return} = \frac{\text{Total Dollar Return}}{\text{Total Investment}} = \frac{3{,}000}{40{,}000} = 0.075 = 7.5\%

So, the overall return of your portfolio was 7.5%.

Would you like more details on this calculation, or do you have any other questions?

Here are 5 related questions you might find useful:

  1. How would the portfolio return change if the investment amounts in Disney and Oracle were different?
  2. What is the significance of a weighted average return in portfolio management?
  3. How does diversification impact the risk and return of a portfolio?
  4. What would be the portfolio return if Disney had a negative return while Oracle had a positive return?
  5. How can you calculate the expected return of a portfolio with more than two assets?

Tip: When calculating portfolio returns, always consider the proportion of the total investment allocated to each asset, as this significantly impacts the overall return.

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Math Problem Analysis

Mathematical Concepts

Finance
Investment
Portfolio Management
Weighted Average

Formulas

Weighted Average Return formula

Theorems

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Suitable Grade Level

Advanced High School or College