Suppose you invest in 200 shares of CBA at $70 per share and 200 shares of WOW at $20 per share. If the price of CBA increases to $80 and the price of WOW decreases to $18 per share, what is the return on your portfolio?

Question

Quizplus · Accepted Answer

First, let's calculate the total initial investment:

200 shares of CBA at $70 per share = 200 x 70 = $14,000
200 shares of WOW at $20 per share = 200 x 20 = $4,000
Total investment = $14,000 + $4,000 = $18,000

After the price changes, the value of the portfolio is:

200 shares of CBA at $80 per share = 200 x 80 = $16,000
200 shares of WOW at $18 per share = 200 x 18 = $3,600
Total value = $16,000 + $3,600 = $19,600

The return on the portfolio is:

(return on investment / initial investment) x 100%

= [(Total value - Total investment) / Total investment] x 100%

= [(19,600 - 18,000) / 18,000] x 100%

= 8.89%

Therefore, the return on the portfolio is 8.89%. The correct choice is B.

Suppose You Invest in 200 Shares of CBA at $70