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1 December, 10:26

Melissa owns the following portfolio of stocks. What is the return on her portfolio? Stock Amount Invested Return A $8.000 17.5% B $4,000 11.0% C $12,000 4.3% A. 8.0% B. 9.0% C. 9.8% D. 10.9%

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  1. 1 December, 10:57
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    The option c is a right answer.

    Explanation:

    For calculating the return on her portfolio, the steps is to be followed which is shown below:

    Step 1: First compute the weight-age of each portfolio.

    Step 2: Multiply the weight-age amount to invested return.

    Step 3: After multiply the amounts, the expected return comes.

    Mathematically,

    Step 1: Weight-age is to be computed by

    = Each Portfolio amount : total stock amount

    where total stock amount = $8,000 + $4,000 + $12,000

    =$24,000

    For A = $8,000 : $24,000 = 0.3333

    For B = $4000 : $24,000 = 0.1666

    For C = $12000 : $24,000 = 0.50

    Step 2:

    Expected Return for A = Weight-age * invested return

    = 0.3333 * 17.5%

    = 5.83%

    Expected Return for B = Weight-age * invested return

    = 0.1666 * 11.0%

    = 1.83%

    Expected Return for C = Weight-age * invested return

    = 0.50 * 4.30%

    = 2.15%

    So, the total return on her portfolio is a sum of Expected Return for A + Expected Return for B + Expected Return for C

    = 5.83% + 1.83% + 2.15%

    = 9.81 %

    Hence, the return on her portfolio is 9.81%.

    Therefore, the option c is a right answer
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