Expected Return = (Weight of Stock A x Return of Stock A) + (Weight of Stock B x Return of Stock B)
Using the ROI formula:
You have a portfolio with two stocks:
Where: PV = present value FV = future value = $1,000 r = discount rate = 10% = 0.10 n = number of years = 5
Using the future value formula:
PV = $1,000 / (1 + 0.10)^5 = $1,000 / 1.61051 = $620.92
If the initial investment is $300, what is the return on investment (ROI)?