# Basic concepts in Finance

Karen purchased a stock for $40 last year. She found out today that she had a -75% return on her investment. Which of the following must be true?

A. The stock is worth $10 today.

B. The stock is worth $30 today.

C. The stock paid no dividends during the year.

D. Both A and C must be true.

You invested $15,000 in a portfolio with an expected return of 10 percent and $10,000 in a portfolio with an expected return of 16 percent. What is the expected return of the combined portfolio?

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#### Solution Preview

Karen purchased a stock for $40 last year. She found out today that she had a -75% return on her investment. Which of the following must be true?

Current Price=$40*(1-75%)=$10

This is possible only when no dividend is paid, as ...

#### Solution Summary

There are two problems. Solution to first problem depicts the steps to estimate the current price of a stock. Solution to second problem describes the steps to estimate the expected return of the combined portfolio in the given case.