A portfolio consisted of 50% Stock A and 50% Stock B. The document provides the annual returns for each stock from 2009 to 2013. To calculate the average return of the portfolio, it multiplies the return of each stock by its percentage in the portfolio (50%), sums these values to get the total return each year, and then calculates the average return over the period, which is 17.70%.
Suppose you had held a portfolio consisting of 50 of Stock A and 50.pdf
1. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What
would have been the average return on the portfolio during this period? Year rA rB 2009 -
30.00% -7.50% 2010 63.00% 22.50% 2011 30.00% -19.50% 2012 -12.00% 75.00% 2013
37.50% 18.00%
Solution
Year Return A Return B 50% of Return A 50% of return B Total return on portfolio 2009 -
30.00% -7.50% -15.00% -3.75% -18.75% 2010 63.00% 22.50% 31.50% 11.25% 42.75% 2011
30.00% -19.50% 15.00% -9.75% 5.25% 2012 -12.00% 75.00% -6.00% 37.50% 31.50% 2013
37.50% 18.00% 18.75% 9.00% 27.75% Average return 17.70%
