Jamie Wong is building an investment portfolio containing two stocks: Stock L and Stock M. Stock L will represent 40% of the dollar value of the portfolio, and Stock M will account for the other 60%. The expected returns over the next 6 years (2015-2020) for each of these stocks are given in a table. The task is to calculate the portfolio return for each year from 2015 to 2020.

1. Problem Description

Jamie Wong is building an investment portfolio containing two stocks: Stock L and Stock M. Stock L will represent 40% of the dollar value of the portfolio, and Stock M will account for the other 60%. The expected returns over the next 6 years (2015-2020) for each of these stocks are given in a table. The task is to calculate the portfolio return for each year from 2015 to

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2. Solution Steps

To calculate the portfolio return for each year, we need to take the weighted average of the returns of Stock L and Stock M, where the weights are their respective proportions in the portfolio (40% for Stock L and 60% for Stock M).

The formula for portfolio return is:

$Portfolio Return = (Weight of Stock L * Return of Stock L) + (Weight of Stock M * Return of Stock M)$

* Year 2015:

$Portfolio Return = (0.40 * 14\%) + (0.60 * 20\%) = 5.6\% + 12\% = 17.6\%$

* Year 2016:

$Portfolio Return = (0.40 * 14\%) + (0.60 * 18\%) = 5.6\% + 10.8\% = 16.4\%$

* Year 2017:

$Portfolio Return = (0.40 * 16\%) + (0.60 * 16\%) = 6.4\% + 9.6\% = 16\%$

* Year 2018:

$Portfolio Return = (0.40 * 17\%) + (0.60 * 14\%) = 6.8\% + 8.4\% = 15.2\%$

* Year 2019:

$Portfolio Return = (0.40 * 17\%) + (0.60 * 12\%) = 6.8\% + 7.2\% = 14\%$

* Year 2020:

$Portfolio Return = (0.40 * 19\%) + (0.60 * 10\%) = 7.6\% + 6\% = 13.6\%$

3. Final Answer

The portfolio returns for each year are as follows:

2015: 17.6%

2016: 16.4%

2017: 16.0%

2018: 15.2%

2019: 14.0%

2020: 13.6%