The expected return of the current portfolio is 10%. A new project is being considered that would be added to the existing portfolio if accepted. The new project would comprise 40% of the entire new portfolio. The expected return of the new project is 11%. Calculate the expected return of the combined new portfolio.

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Business

Selah Pace

4 May, 02:29

The expected return of the current portfolio is 10%. A new project is being considered that would be added to the existing portfolio if accepted. The new project would comprise 40% of the entire new portfolio. The expected return of the new project is 11%. Calculate the expected return of the combined new portfolio.

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Cullen Wood · Answer 1

10.4%

Explanation:

The computation of the expected return of the combined new portfolio is shown below:

= (Expected return of the current portfolio * weightage of current portfolio) + (expected return of the new project * weightage of new portfolio)

= (10% * 60%) + (11% * 40%)

= 6% + 4.4%

= 10.4%

The weighatge of current portfolio is come from

= 100% - 40%

= 60%