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Fremont Enterprises has an expected return of and Laurelhurst News has an expected return of . If you put of your portfolio in Laurelhurst and in​ Fremont, what is the expected return of your​ portfolio?

Answer :

Shahzaibfaraz

The question is incomplete as it is missing the figures. The complete question is,

Fremont Enterprises has an expected return of 15% and Laurelhurst News has an expected return of 20%.  If you put 70% of your portfolio in Laurelhurst and 30% in Fremont, what is the expected return of your portfolio?

Answer:

Portfolio return = 0.185 or 18.5%

Explanation:

The expected return of a portfolio is a function of the weighted average of the individual stocks returns' that form up the portfolio. The expected return of a portfolio can be calculated using the following formula,

Portfolio return = wA * rA  +  wB * rB  +  ...  +  wN * rN

Where,

  • w represents weight of each stock in the portfolio
  • r represents the return of each stock in the portfolio

Portfolio return = 0.3 * 0.15  +  0.7 * 0.2

Portfolio return = 0.185 or 18.5%

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