Your superannuation fund comprises 300 units of the Diversified Large Industrials fund (DLI)and 100 shares of Cochlear (COH). The price of DLI is $140 and that of COH is $95. If you expect the return on DLI to be 15% in the next year and the return on COH to be 8%, 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 expected returns of the two investments. The value of the DLI investment is 300 units * $140 = $42,000, and the expected return is 15%. The value of the COH investment is 100 shares * $95 = $9,500, and the expected return is 8%. The total value of the portfolio is $42,000 + $9,500 = $51,500. The expected return for the portfolio is [(42,000/51,500) * 15%] + [(9,500/51,500) * 8%] = 0.8155 * 15% + 0.1845 * 8% = 12.2325% + 1.476% = 13.7085%, which rounds to 13.71%.

Your Superannuation Fund Comprises 300 Units of the Diversified Large