You buy 50 stocks of Company A, 30 of Company B, and 20 of Company C. The annual returns of these companies are 8%, 12%, and 10% respectively. The average return for one year is the closest to __________.Multiple Choice9.1%10.0%10.5%9.6%
Question
You buy 50 stocks of Company A, 30 of Company B, and 20 of Company C. The annual returns of these companies are 8%, 12%, and 10% respectively. The average return for one year is the closest to __________.Multiple Choice9.1%10.0%10.5%9.6%
Solution
To calculate the average return, we need to take into account the number of stocks bought from each company and their respective returns.
First, calculate the total return from each company:
- Company A: 50 stocks * 8% = 4
- Company B: 30 stocks * 12% = 3.6
- Company C: 20 stocks * 10% = 2
Next, add these returns together to get the total return: 4 + 3.6 + 2 = 9.6
Then, calculate the total number of stocks bought: 50 + 30 + 20 = 100
Finally, divide the total return by the total number of stocks to get the average return: 9.6 / 100 = 0.096 or 9.6%
So, the average return for one year is closest to 9.6%.
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