If you invest 40% of your investment in GE with an expected rate of return of 10% and the remainder in IBM with an expected rate of return of 16%, the expected return on your portfolio is:
A) 12.4%
B) 13%
C) 13.6%
D) 14.5%

Question

Quizplus · Accepted Answer

To calculate the expected return on the portfolio, we need to use the weighted average formula: 
Expected return = (weight of investment 1 * expected return of investment 1) + (weight of investment 2 * expected return of investment 2)

So, if we invest 40% in GE and 60% in IBM:

Expected return = (0.4 * 0.10) + (0.6 * 0.16) 
Expected return = 0.04 + 0.096 
Expected return = 0.136 or 13.6%

Therefore, the answer is C.

If You Invest 40% of Your Investment in GE with an Expected