USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that you hold a two-stock portfolio. You are provided with the following information on your holdings:

-Refer to Exhibit 1.6. Calculate the HPY for the portfolio.
A) 10.6%
B) 6.95%
C) 13.5%
D) 10%
E) 15.7%

Question

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that you hold a two-stock portfolio. You are provided with the following information on your holdings:
 
-Refer to Exhibit 1.6. Calculate the HPY for the portfolio.
A) 10.6% 
B) 6.95% 
C) 13.5% 
D) 10% 
E) 15.7%

Quizplus · Accepted Answer

The HPY is calculated as the weighted average of the HPYs of the individual assets in the portfolio. The HPY of each asset is calculated as the product of its yield and its weight in the portfolio. The weights of the assets are given in Exhibit 1.6. The HPY of the portfolio is therefore:HPY = (0.50 * 10%) + (0.25 * 15%) + (0.25 * 5%) = 10.6%