. Your portfolio consists of Apple and Boeing stock. Apple has an expected return of 10%...
. Your portfolio consists of Apple and Boeing stock. Apple has an expected return of 10% and Boeing has an expected return of 14%. How much Apple stock should you hold if you are targeting an expected return of 13%?
Homework Answers
Expected return on a portfolio is weighted average return of constituents.
Assume weight in Apple stock is W. So weight in Boeing stock would then be '1 - W'.
0.13 = 0.10 * W + 0.14 - 0.14 * W
0.04 * W = 0.01
W = 25% ---> Weight of portfolio is Apple Stock.
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