Question

Portfolio Return At the beginning of the month, you owned $6,200 of Company G, $8,400 of Company S, and $1,800 of Company N. The monthly returns for Company G, Company S, and Company N were 7.65 percent, -1.54 percent, and -19 percent. What is your portfolio return? Multiple Cholce 263% 210% 5.92% 3.13%

Answer 1

Portfolio owned at the beginning of the month along with the monthly returns are as follows -

Company Name	Asset Value in $	Return
G	6200	7.65%
S	8400	-1.54%
N	1800	-0.19%
Total	16400	?

The returns on the portfolio are calculated as the weighted average of the returns on all the assets held in the portfolio.

Formula for Return on Portfolio (as returns are for one period and also for same period) -

Rp = {1-1 Wiri Where 21-1 W; = 1

wherein, w = weight and r = return on asset

Return on Portfolio (Rp) =(weightA*return on assetA)+ (weightB*return on assetB)+...(weightZ*return on assetZ)

Computation of weights, as follows -

Total Amount invested as per above table is $16,400

Weight of Asset- Company G, Wg = $6200/$16,400 = 0.38

Weight of Asset- Company S, Ws = $8400/$16,400 = 0.51

Weight of Asset- Company N, Wn = $1800/$16,400 = 0.11

Now, Computation of return on portfolio as follows -

Rp = (0.38*7.65%) + (0.51*-1.54%) + (0.11*-0.19%)

Rp= 2.91% + (-0.79%) + (-0.02%)

Rp= 2.10%

Hence, the portfolio return held during the beginning of the month as summarised in above table is 2.10%

Option-2 is the correct answer