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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.

Respuesta :

Answer:

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%

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