A £50,000 portfolio consists of £30,000 of Stock A and £20,000 of Stock B. Find the return on the portfolio if Stock A has a return of 15% and Stock B has a return of 12%.

Question

Quizplus · Accepted Answer

The return on the portfolio can be calculated by finding the weighted average of the returns of Stock A and Stock B. For Stock A, the weight is £30,000/£50,000 = 0.6, and for Stock B, the weight is £20,000/£50,000 = 0.4. The total return is (0.6 * 15%) + (0.4 * 12%) = 9% + 4.8% = 13.8%.

A £50,000 Portfolio Consists of £30,000 of Stock a and £20,000