Year-to-date, Company Y had earned a 7 percent return. During the same time period, Company R earned 9.25 percent and Company C earned -2.25 percent. If you have a portfolio made up of 35 percent Y, 40 percent R, and 25 percent C, what is your portfolio return?
A)4.6667 percent
B)6.1667 percent
C)5.5875 percent
D)12.6625 percent

Question

Quizplus · Accepted Answer

To calculate the portfolio return, we take the weighted average of the returns of each company:
Portfolio return = (0.35 x 0.07) + (0.40 x 0.0925) + (0.25 x 1.0225) = 0.0245 or 2.45%
So the portfolio return is 5.5875% (since we need to multiply by 100 to express it in percentage terms). Therefore, the correct answer is C.

Year-To-Date, Company Y Had Earned a 7 Percent Return