Would anyone be able to help me with the following calc?
If the return of a two asset portfolio is given, what is the calculation for finding the weights as in the following practice problem from reading 42:
A portfolio consists of 2 securities. Security 1 has an expected return of 16% and Security 2 has an expected return of 12%.
If the portfolio has an expected return of 15%, what are the proportions in each security?
I could answer the question by the process of elimination however I would like to learn the actual calc
The part I dont understand is how this
Rp = w1 x 16% + (1 - w1 ) x 12%
15% = 0.75(16%) + 0.25(12%)
All help much appreciated!