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    Calculate the portfolio weights and expected return

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    Financial Calculations: Portfolio Weights and Expected Return

    You own a portfolio of 250 shares of firm A worth $60/share and 1500 shares of firm B worth $40/share. You expect a return of 4% for stock A and a return of 9% for stock B. Please provide the calculations for the given problems in an Excel spreadsheet.

    (a) What are the portfolio weights and what is the expected return?

    (b) Suppose firm A's share price falls to $48 and firm B's share price goes up to $44. What are the portfolio weights and what is the expected return in the changed scenario.

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    Solution Preview

    Problem: You own a portfolio of 250 shares of firm A worth $60/share and 1500 shares of firm B worth $40/share. You expect a return of 4% for stock A and a return of 9% for stock B.

    *See attached Excel sheet for calculations

    (a) What are the portfolio weights and what is the expected return?

    Number of shares of firm A=Na= 250
    Price of a ...

    Solution Summary

    This solution depicts the steps required to estimate the portfolio weights and expected portfolio return. Solution are given in an Excel file.

    $2.19