A portfolio consists of $13,600 in Stock M and $19,400 invested in Stock N. The expected return on these stocks is 8.10 percent and 11.70 percent, respectively. What is the expected return on the portfolio

Portfolio return is 10.22%

Explanation:

The expected return of a portfolio is the function of the weighted average of the individual stock returns that form up the portfolio. The formula to calculate the expected return of the portfolio is as follows,

Portfolio Return = wA * rA + wB * rB + ... + wN * rN

Where,

w is the weightage of each asset/stock in the portfolio r is the return of each stock

The weightage of each stock can be calculated by dividing the investment in the stock by the total investment in the portfolio.

Total investment - portfolio = 13600 + 19400 = $33000

Portfolio Return = 13600/33000 * 0.0810 + 19400/33000 * 0.1170

Portfolio Return = 0.10216 or 10.216% rounded off to 10.22%