Your superannuation fund comprises 100 units of the Diversified Large Industrials fund (DLI)and 100 shares of Cochlear (COH). The price of DLI is $120 and that of COH is $98. If you expect the return on DLI to be 10% in the next year and the return on COH to be 5%, what is the expected return for your retirement portfolio?

Question

Quizplus · Accepted Answer

The expected return for the retirement portfolio can be calculated by finding the weighted average of the returns of DLI and COH based on their current values. The value of the DLI investment is 100 units * $120 = $12,000, and the value of the COH investment is 100 shares * $98 = $9,800. The total value of the portfolio is $12,000 + $9,800 = $21,800. The expected return on DLI is 10%, and the expected return on COH is 5%. The weighted average return is calculated as follows: [(12,000/21,800) * 10%] + [(9,800/21,800) * 5%] = 0.5505 * 10% + 0.4495 * 5% = 5.505% + 2.2475% = 7.7525%, which rounds to 7.75%.

Your Superannuation Fund Comprises 100 Units of the Diversified Large