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You own a portfolio that has $2,200 invested in Stock A and $3,200 invested in Stock B. If the expected returns on these stocks are 7 percent and 10 percent, respectively, what is the expected return on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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Answer:

Expected Return on Portfolio = 8.78%

Explanation:

The investment in stock A $2200 while investment in Stock B $3200 by adding both total investment of stock becomes $5400. Dividing Stock A and stock  investment by total investment of portfolio gives the weight individual stocks in portfolio as Stock A has 40.7% while stock B has 59.3%. The expected return of Stock A is 7% while expected Return Stock B is 10% Multiplying the individual expected return of stock with weight of stock gives weighted return of individual stock and through adding weighted return of individual stock we get weighted average return of stocks at 8.78%.

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