Answer:
5.64% per annum
Explanation:
INVESTMENTS PRICE VALUE($) WEIGHTS
100 shares of SPY $112 11200 11200/21200 = 0.53
100 shares of AGG $100 10000 10000/21200 = 0.47
Total Investment 21200
Return of a portfolio is the weighted average return of individual securities in a portfolio. It is expressed and calculated using following formula,
[tex]R_{p} = R_{a} *\ W_{a} \ +\ R_{b} *\ W_{b}[/tex]
[tex]R_{p}[/tex] = .08 × 0.53 + .03 × 0.47
[tex]R_{p}[/tex] = .05636 or 5.64% p.a
Hence expected return for investment would be 5.64%
Expected return of a portfolio represents anticipated rate of return on similar stocks. Expected rate of return is the probable rate of return and is thus usually determined using the probability.
