A stock portfolio consists of four stocks. Stock A represents 20% of the portfolio and has a return of 6%. Stock B represents 30% of the portfolio and has a return of 8%. Stock C represents 20% of the portfolio and has a return of 4%. Stock D represents the remaining 30% of the portfolio and has a negative-return of 5%. What is the average return of the portfolio?
Question:
A stock portfolio consists of four stocks. Stock A represents 20% of the portfolio and has a return of 6%. Stock B represents 30% of the portfolio and has a return of 8%. Stock C represents 20% of the portfolio and has a return of 4%. Stock D represents the remaining 30% of the portfolio and has a negative-return of 5%. What is the average return of the portfolio?
A stock portfolio consists of four stocks. Stock A represents 20% of the portfolio and has a return of 6%. Stock B represents 30% of the portfolio and has a return of 8%. Stock C represents 20% of the portfolio and has a return of 4%. Stock D represents the remaining 30% of the portfolio and has a negative-return of 5%. What is the average return of the portfolio?
Options
Answer: (1) 2.9%
Explanation:
Weighted average: (0.20×6) + (0.30×8) + (0.20×4) + (0.30×(-5)) = 1.2 + 2.4 + 0.8 - 1.5 = 2.9%.
Explanation:
Weighted average: (0.20×6) + (0.30×8) + (0.20×4) + (0.30×(-5)) = 1.2 + 2.4 + 0.8 - 1.5 = 2.9%.
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