Melissa owns the following portfolio of stocks. What is the return on her portfolio?
A) 8.0%
B) 9.0%
C) 9.8%
D) 10.9%

Question

Melissa owns the following portfolio of stocks. What is the return on her portfolio? 
A) 8.0% 
B) 9.0% 
C) 9.8% 
D) 10.9%

Quizplus · Accepted Answer

To calculate the return on the portfolio, we need to find the weighted average of the returns on individual stocks.

Weighted average return = (weight of stock 1 x return of stock 1) + (weight of stock 2 x return of stock 2) + ... + (weight of stock n x return of stock n)

Here, the weights are the percentage of total value each stock contributes to the portfolio, and the returns are the expected returns on each stock.

The calculations are as follows:

Weight of AAPL = 40% 
Weight of TSLA = 30% 
Weight of AMZN = 15% 
Weight of MSFT = 10% 
Weight of FB = 5%

Return of AAPL = 12% 
Return of TSLA = 10% 
Return of AMZN = 8% 
Return of MSFT = 9% 
Return of FB = 5%

Weighted average return = (0.40 x 0.12) + (0.30 x 0.10) + (0.15 x 0.08) + (0.10 x 0.09) + (0.05 x 0.05)
= 0.048 + 0.03 + 0.012 + 0.009 + 0.0025
= 0.1015 or 10.15%

Therefore, the correct answer is C) 9.8%.

Melissa Owns the Following Portfolio of Stocks