Answer:
The expected return of portfolio is 16.8%.
Explanation:
40 percent of a portfolio is invested in an investment with an expected return of 12 percent and 60 percent of your portfolio in an investment with an expected return of 20 percent.
Assume the investment to be x.
The return from the first investment
= [tex]0.4\ \times\ 0.12\ \times\ x[/tex]
= 0.048x
The return from the second investment
= [tex]0.6\ \times\ 0.2\ \times\ x[/tex]
= 0.12x
The total return from both the investments
= 0.048x + 0.12x
= 0.168x
The percentage of return
= [tex]\frac{Total\ investment}{Total\ return} \ \times\ 100[/tex]
= [tex]\frac{0.168x}{x} \ \times 100[/tex]
= 16.8%
