Wilson Miller has his first full time job and is considering how to invest his savings. His dad suggested he invest no more than 25% of his savings in the stock of his employer (EMR) so he is considering investing the remaining 75% in a combination of risk-free investments in the US Treasury Bills, currently paying 4% and Starbucks (SBUX) common stock. Wilson father has invested in the stock market for many years and suggested that Wilson might expect to earn 9% in the Emerson shares and 12% from the Starbucks shares. Wilson decides to put 25% in the Emerson shares, 25% in the Starbucks shares and the remaining 50% in Treasury Bills. Given Wilson Portfolio Allocation, what rate of return should he expect to receive on his investment?

The expected rate of return for Wilsons portfolio, can be calculated as a weighted average of these expected rates of return, where the weights are the proportions of each investments.

Question 1a.

Calculate the expected rate of return for Wilson Portfolio, in a tabular format display this information and calculate the portfolio return

Question 1b.

Calculate the expected return for Wilsons portfolio, where he places a quarter of his money in Treasury Bills, half in Starbucks and the remainder in EMR