What is the expected stock portfolio balance if the portfolio is evaluated after 1 year?

Question

BlackTom AI · Accepted Answer

The question asks for the expected stock portfolio balance after 1 year, but there are no details provided to perform a calculation.

First, identify the missing inputs that are typically required:
- Initial portfolio value (the starting balance at time zero)
- Expected or assumed annual return rate for the stocks in the portfolio (as a percentage or decimal)
- Any cash contributions or withdrawals during the year (deposits or rebalancing)
- Fees or taxes that might reduce the balance
- Whether the return is being treated as simple interest, compound annual growth, or a more complex model (e.g., monthly compounding, volatility-based assumptions)

Next, outline how to compute under common scenarios:
- If the annual return is r and compounding is annual with no contributions or withdrawals, the balance after 1 year is B1 = B0 × (1 + r).
- If there are end-of-year contributions C, and compounding is annual, then B1 = (B0 × (1 + r)) + C.
- If contributions occur gradually or monthly, a more precise approach would sum each contribution with the return earned up to year-end, or use a formula for future value of an annuity: B1 = B0 × (1 + r) + C × [ (1 + r)^{n} − 1 ] / r, where n is the number of periods (e.g., months converted to years).
- If fees f are applied, you would adjust the return or subtract fees from the balance: B1 = [previous formula] − Fees, or equivalently B1 = B0 × (1 + r − f) + contributions adjusted similarly.

Finally, demonstrate how to proceed once data is available:
- Gather B0, r, C, fees, and compounding convention.
- Decide on the correct formula based on when contributions are made and how often compounding occurs.
- Compute step by step, and verify units (annual vs monthly) to avoid mismatches.

If you can provide the initial balance, the expected annual return, any deposits/withdrawals during the year, and any fees, I can plug those into the appropriate formula and give you a precise numerical answer for the balance after 1 year.

SP25 RMI 660 001 HW2: Portfolio Simulation

What is the expected stock portfolio balance if the portfolio is evaluated after 1 year?

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