Correct option is A
Given:
Stock A: 20% of portfolio, return = 6%
Stock B: 30% of portfolio, return = 8%
Stock C: 20% of portfolio, return = 4%
Stock D: 30% of portfolio, return = -5%
Formula Used:
The average return of a portfolio is the weighted sum of the returns of individual stocks, which is given by:
Average Return =
Where:
are the weights (proportions) of stocks A, B, C, and D in the portfolio.
are the returns of stocks A, B, C, and D respectively.
Solution:
Substitute the given values into the formula:
Thus, The average return of the portfolio is 2.9%.
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