Your retirement portfolio comprises 100 shares of the Standard & Poor's 500 fund (SPY)and 100 shares of iShares Barclays Aggregate Bond Fund (AGG).The price of SPY is $120 and that of AGG is $98.If you expect the return on SPY to be 10% in the next year and the return on AGG to be 5%,what is the expected return for your retirement portfolio?

Question

Quizplus · Accepted Answer

The expected return is calculated by finding the weighted average of the returns of the two investments. The total value of the portfolio is (100 * $120) + (100 * $98) = $21,800. The weight of SPY is ($12,000 / $21,800) and the weight of AGG is ($9,800 / $21,800). The expected return is (weight of SPY * 10%) + (weight of AGG * 5%) = 7.75%.

Your Retirement Portfolio Comprises 100 Shares of the Standard