Urgent basis

mohan.sic

Well-Known Member
#1
Q:59. A portfolio comprises of two stocks A and B. Stock A gives a return of 9%and stock B gives a return of 6%. Stock A has a weight of 60% in the portfolio. What is the portfolio return? [2 Marks]
(a) 11%
(b) 9%
(c) 10%
(d) 8%

Ans: d ---- 8%

could someone pls explain how this is arrived at.


regards, mohan.
 

Placebo

Well-Known Member
#2
This is how the value is arrived at

Weight of stock A * Returns of Stock A = 60% x 9%

= 5.4%

Weight of stock B * Returns of Stock B = 40% x 6%

= 2.4%

Return of the portfolio = 5.4% + 2.4%

= 7.8 %

Round it off to the higher decimal and you get 8 %

Hope This Helps

-Placebo
 

r.k

New Member
#3
In simple
Just imagine you bought Stock A for 60/- and B for 40/-
Total investment is 100/-
Now A increased 9% ie 60 becomes 65.4/-
and B increased 6% ie 40 becomes 42.4/-
Total portfolio value after appreciation is 107.8/-
so total 7.8% profit,Rounded to 8%

~RK
 

Similar threads