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Imagine you invest in the following stocks: $11,600 of A, $7,800 of B, $14,900 of C, and $3,200 of D. The required returns on these stocks are 10.7%, 15.4%, 3.9%, 9.1%, respectively. What is the required rate of return on the portfolio?

1

You start with $37500, divided into four piles.

Each pile grows by a certain amount over a year; for example the second pile grows by 15.4% of 7800, or 1201.20

What is the total growth in all four piles?

What is the total growth as a percentage of the $37 500?

  • So you could do 10.7%(11,600) + 15.4%(7,800) +... = $3,314.7? And that over your total of $37,500 gives you an IRR of 8.84%? – Bryyo Oct 19 '16 at 4:08

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