You Own a Portfolio of Two Stocks,A and B

question 54

Multiple Choice

You own a portfolio of two stocks,A and B.Stock A is valued at $6,500 and has an expected return of 11.2 percent.Stock B has an expected return of 8.1 percent.What is the expected return on the portfolio if the portfolio value is $9,500?

• A)9.58 percent
• B)9.62 percent
• C)9.74 percent
• D)10.07 percent
• E)10.22 percent

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Definitions:

Variable Costs

Expenses that fluctuate in proportion to the level of output or activity, such as raw materials and direct labor costs.

Fixed Costs

Expenditures that do not vary with the degree of output or sales, for instance, rental fees, wages, and insurance premiums.

Break-Even Point

The point at which total costs and total revenues are equal, meaning a business is not making a profit but also not incurring a loss.

Margin of Safety

The difference between actual or projected sales and the break-even sales level, used to assess risk and financial stability.