7. (Rate of return on a portfolio) A portfolio has been constructed from the following securities:...

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7. (Rate of return on a portfolio) A portfolio has been constructed from the following securities: Expected return Amount invested Security K L M 15% 9 20 $5,000 3,000 2,000 a. What is the expected rate of return from this port- folio? b. If Security L is sold, what will be the expected re- turn of the remaining two-stock portfolio? c. If the investor buys $10,000 of Security N, with ex- pected return of 12%, and adds it to the portfolio, what will be the expected return of the resulting four-stock portfolio? d. If the investor sells $2,000 of Security K, what will be the expected return of the remaining three-stock portfolio? 7. (Rate of return on a portfolio) A portfolio has been constructed from the following securities: Expected return Amount invested Security K L M 15% 9 20 $5,000 3,000 2,000 a. What is the expected rate of return from this port- folio? b. If Security L is sold, what will be the expected re- turn of the remaining two-stock portfolio? c. If the investor buys $10,000 of Security N, with ex- pected return of 12%, and adds it to the portfolio, what will be the expected return of the resulting four-stock portfolio? d. If the investor sells $2,000 of Security K, what will be the expected return of the remaining three-stock portfolio?

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a To calculate the expected rate of return from the portfolio we first need to calculate the total amount invested and the weighted average of the exp... View the full answer