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23 May, 22:27

The expected return of the current portfolio is 10%. A new project is being considered that would be added to the existing portfolio if accepted. The new project would comprise 40% of the entire new portfolio. The expected return of the new project is 11%. Calculate the expected return of the combined new portfolio.

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  1. 23 May, 22:52
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    10.4%

    Explanation:

    The computation of the expected return of the combined new portfolio is shown below:

    = (Expected return of the current portfolio * weightage of current portfolio) + (expected return of the new project * weightage of new portfolio)

    = (10% * 60%) + (11% * 40%)

    = 6% + 4.4%

    = 10.4%

    The weighatge of current portfolio is come from

    = 100% - 40%

    = 60%
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