If you invest 30% of your funds in Lucent stock, with an expected rate of return of 10%, and the remainder in GM stock, with an expected rate of return of 15%, the expected return on your portfolio is

Let X = total funds.

GM annual earnings = 0.7 * 0.15 X = 0.105X
Lucent annual earnings = 0.3*0.10 X = 0.03X
Total earnings = 0.135 X

The expected return is 13.5% of the investment portfolio amount (X).

They only want the percent return. The actual dollar amount depends upon X.

To determine the expected return on your portfolio, you need to calculate the weighted average of the returns from the two stocks.

Step 1: Calculate the weighted return for each stock.
For Lucent stock, multiply the expected rate of return (10%) by the percentage of funds invested (30%): 0.10 x 0.30 = 0.03 or 3%.

For GM stock, multiply the expected rate of return (15%) by the percentage of funds invested (70%, which is the remainder after investing 30% in Lucent stock): 0.15 x 0.70 = 0.105 or 10.5%.

Step 2: Add the weighted returns together.
The weighted return for Lucent stock is 3%, and the weighted return for GM stock is 10.5%. Add these two numbers together: 3% + 10.5% = 13.5%.

Therefore, the expected return on your portfolio is 13.5%.