Question

"An investment advisor has recommended a $50,000 portfolio containing assets R, J, and K; $25,000 will be invested in asset R, with an expected annual return of 12 percent; $10,000 will be invested in asset J, with an expected annual return of 18 percent; and $15,000 will be invested in asset K, with an expected annual return of 8 percent. The expected annual return of this portfolio is ________."

Answer 1

Answer:

The expected annual return of Portfolio is 12.00%

Explanation:

The portfolio return is calculated by multiplying the individual security return with weight of individual security in the portfolio. We have three securities R, J and K with expected return on 12%, 18% and 8% with weight of 50%, 20% and 30%. Through multiplying them we get individual return of security that is 6%, 3.6% and 2.4%. The weighted average portfolio return is 12%