Portfolio Return At the beginning of the month, you owned $6,000 of Company G, $8,000 of Company S, and $1,000 of Company N. The monthly returns for Company G, Company S, and Company N were 7.25 percent, -1.50 percent, and -0.23 percent. What is your portfolio return?
A) 1.84%
B) 2.09%
C) 3.71%
D) 5.52%

Question

Quizplus · Accepted Answer

To find the portfolio return, we need to calculate the weighted average of the returns for each company.

Weighted average return = (weight of G * return of G) + (weight of S * return of S) + (weight of N * return of N)

Weight of G = $6,000 / ($6,000 + $8,000 + $1,000) = 0.4286
Weight of S = $8,000 / ($6,000 + $8,000 + $1,000) = 0.5714
Weight of N = $1,000 / ($6,000 + $8,000 + $1,000) = 0.0714

Weighted average return = (0.4286 * 0.0725) + (0.5714 * (-0.0150)) + (0.0714 * (-0.0023)) = 0.0209 or 2.09%

Therefore, the answer is B, 2.09%.

Portfolio Return at the Beginning of the Month, You Owned