Stock A has an expected return of 10% per year and stock B has an expected return of 20%.If 40% of a portfolio's funds are invested in stock A,and the rest in stock B,what is the expected return on the portfolio of stock A and stock B?
A)10%
B)20%
C)16%
D)14%

Question

Quizplus · Accepted Answer

To find the expected return on the portfolio, we need to take the weighted average of the returns of stock A and stock B based on the percentage of funds invested in each.

Expected return on Portfolio = (0.4 x 10%) + (0.6 x 20%)
= 4% + 12%
= 16%

Therefore, the expected return on the portfolio is 16%. Hence, the correct choice is C.

Stock a Has an Expected Return of 10% Per Year