Asked by David Hornbek Jr. on Jun 27, 2024
Verified
Don has $3,000 invested in AT&T with an expected return of 11.6 percent; $10,000 in IBM with an expected return of 12.8 percent; and $6,000 in GM with an expected return of 12.2 percent. What is Don's expected return on his portfolio?
A) 12.42%
B) 12.20%
C) 11.81%
D) Cannot be determined
Expected Return
The anticipated gain or loss that an investor predicts from an investment over a period, based on historical averages or estimated models.
Portfolio
A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including closed-end funds and exchange traded funds.
- Learn how to calculate the expected return of a portfolio comprising different securities.
Verified Answer
WL
Worth LivingJun 28, 2024
Final Answer :
A
Explanation :
The expected return on Don's portfolio can be calculated by taking the weighted average of the expected returns of the individual investments. The calculation is as follows: [(3,000 * 11.6%) + (10,000 * 12.8%) + (6,000 * 12.2%)] / (3,000 + 10,000 + 6,000) = 12.42%.
Learning Objectives
- Learn how to calculate the expected return of a portfolio comprising different securities.
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