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24 December, 22:28

A portfolio is consisted of two stocks:$1,000 in stock X and $3,500 in stock Y. The expected return on stock X is 12%, and 6% for stock Y. What is the expected rate of return of this portfolio

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  1. 24 December, 22:42
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    Portfolio return = 7.3%

    Explanation:

    The portfolio expected rate of return would be the weighted average expected rate of return

    Weighted average expected rate of return=

    12% * (1000 / (3500+1000) + (3,500 / (1000+3500) * 6% = 0.073333333

    Expected rate of return = 0.073333333 * 100 = 7.3%

    Portfolio return = 7.3%
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