# Return on the portfolio

The weights and returns for individual positions in a portfolio are shown below: Position ____Mkt. Value at 1/1/05(\$mm)_____Return for 2005(%) __A_____________1.3____________________-2.0________ __B_____________1.4____________________-4.2________ __C_____________2.2____________________+6.4________ __D_____________3.9____________________+2.1________ __E_____________1.7____________________-0.8_________ What is the return on the porfolio? A) +1.18% B) -1.20% C) +1.50% D) +2.48% I don’t understand why the answer key take the positive value of return while some weights of individual investment position get negative? Thank you!

The answer should be A. (1.3*-2.0)+(1.4*-4.2)+(2.2*6.4)+(3.9*2.1)+(1.7*-0.8)=12.43 12.43/Sum(1.3, 1.4,…1.7)=1.18

Agree with A

I’ll tell you why. More than half of the portfolio (58%) consisted of positions that had positive returns. That’s why.

cjones65 Wrote: ------------------------------------------------------- > I’ll tell you why. More than half of the portfolio > (58%) consisted of positions that had *positive > returns. That’s why. =============================== *…that is, sufficiently positive to off-set the negative returns of the lesser-weighted positions

Thu Thuy Wrote: ------------------------------------------------------- > The weights and returns for individual positions > in a portfolio are shown below: > > Position ____Mkt. Value at 1/1/05(\$mm)_____Return > for 2005(%) > __A_____________1.3____________________-2.0_______ > _ > __B_____________1.4____________________-4.2_______ > _ > __C_____________2.2____________________+6.4_______ > _ > __D_____________3.9____________________+2.1_______ > _ > __E_____________1.7____________________-0.8_______ > __ > > What is the return on the porfolio? > > A) +1.18% > B) -1.20% > C) +1.50% > D) +2.48% > > I don’t understand why the answer key take the > positive value of return while some weights of > individual investment position get negative? Thank > you! Just by eyeballing the heavier weighted positive positions you can tell that their gains are going to offset the losses from the negative positions. You should be able to eliminate B right off the bat. The negative returns on the other three weightings should tell you that D isn’t going to be the likely choice either. If you follow preccie’s method you can finish this problem in 45 seconds.