Question

Given the following information estimate the monthly expected return of a portfolio of 40% AAA and 60% BBB. Assume you purchase these shares in July 2018. Enter your answer as a percent. Do not include the % sign. Round your final answer to two decimals.

	Stock Price
Month	AAA	BBB
Jan-18	100	75
Feb-18	120	80
Mar-18	140	95
Apr-18	110	100
May-18	115	85
Jun-18	95	90
Jul-18	100	100

Answer 1

Now, the end of month share price is the beginning price of share of next month. Below, is the calculation of monthly average return for AAA and BBB considering the above fact.

nm rinoco Α I C D E AAA BBB stcok BBB Month JAAA stock price Return price Return 18-Jan 100 =(B3-B2) 75 7% 18-Feb 120 BR 80 19% 18-Mar 140 -21% 95 5% 18-Apr 110 5% -15% 18-May 115 -17% 18-Jun 955% 90 11% 18-Jul 100 100 Average Return 1.28% 5.45% 100 85 6%

757 7% 120 17% Α AAA BBB stcok BBB Month AAA stock price Return price Return 18-Jan 100 20% 18-Feb 80 19% 18-Mar 140 -21% 95 5% 18-Apr 110 100 -15% 18-May 115 -17% 85 6% 18-Jun 95 5% 90 11% 18-Jul 100] L 100 Average Return =AVERAGE(C2:07) 5.45% 5% Nm 7 or 000 10

Now the expected monthly return of the portfolio= weight of AAA* average return on AAA+weight of BBB* average return on BBB= 40%*1.28%+60%*5.45%=3.78%

Hence, the expected monthly return of the portfolio is 3.78 percent