Question

60. A portfolio comprises two securities and the expected retum on them is 12% and 16% respectively
Determine return of portfolio if first security constitutes 40% of total portfolio.
(A) 12.409
B) 13.4095
(C) 14.4094
(Di 15.4096​

Answer 1

(C) 14.4

An investment portfolio contains many types of investments. The return on these investments in the form of profits and losses is the portfolio return or return on a portfolio. Given that the portfolio in the question has two securities.

Return on security 1 = 12%

Return on security 2 = 16%

We need to find the portfolio return if the first security constitutes 40% of the total portfolio.

Since security 1 constitutes 40% of the total portfolio, security 2 must constitute 60% of the total portfolio.

Return on portfolio will be =  (40 X 12% + 60 x 16%)= 14.4%

Answer 2

Option (C) is the correct answer

Explanation:

• A diverse range of investments can be found in an investment portfolio.

• The portfolio return, often known as the return on a portfolio, is the profit or loss on these investments. Given the presence of two securities in the portfolio in question.

Return on security 1 (ROS1) = 12%

Return on security 2 (ROS2) = 16%

• If the first security accounts for 40% of the whole portfolio, we must calculate the portfolio return.

• Because security 1 accounts for 40% of the overall portfolio, security 2 must account for 60% of the total portfolio.

• The portfolio's return will be:
• 40 x 12 percent + 60 x 16 percent= 14.4094%.

hence, Option (C) is the correct answer