The price of BHP is $40 per share and that of RIO is $45 per share. The price of BHP increases to $45 per share after one year and to $50 after two years. Also, shares of RIO increase to $50 after one year and to $60 after two years. If your portfolio comprises 100 shares of each security, what is your portfolio return in year 1 and year 2? Assume no dividends are paid.

Question

Quizplus · Accepted Answer

The portfolio return for year 1 is calculated as the percentage increase in the total value of the portfolio: [(($45-$40)*100 + ($50-$45)*100) / ($40*100 + $45*100)] * 100 = 11.76%. For year 2, the return is: [(($50-$45)*100 + ($60-$50)*100) / ($45*100 + $50*100)] * 100 = 15.79%.

The Price of BHP Is $40 Per Share and That