Question

Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes (LOW) at $30 per share, and 100 shares of Ball Corporation (BLL) at $40 per share. Suppose over the next year Ball has a return of 12.5%, Lowes has a return of 21%, and Abbott Labs has a return of - 10%. The retum on your portfolio over the year is: O A. 3.8% OB. 0% O C. 7.6% O D. 5.7%

Answer 1

return on portfolio = (ending value of portfolio - total amount invested) / total amount invested

ending value of each stock = number of shares * ending price

ending value of ABT = 200 * ($50 * (1 - 10%)) = $9,000

ending value of LOW = 200 * ($30 * (1 + 21%)) = $7,260

ending value of BLL = 100 * ($40 * (1 + 12.5%)) = $4,500

ending value of portfolio = $9,000 + $7,260 + $4,500 = $20,760

return on portfolio = ($20,760 - $20,000) / $20,000

return on portfolio = 3.8%