Answer:
The expected annual return of this portfolio is 12%
Explanation:
For calculating the expected annual return of the portfolio first we have to compute the weightage of every assets which is equals to
= Assets value ÷ total value of assets
where,
total value of assets = A + B + C
= $25,000 + $10,000 + $15,000
= $50,000
So
For A = $25,000 ÷ $50,000 = 0.5
For B = $10,000 ÷ $50,000 = 0.2
For C = $15,000 ÷ $50,000 = 0.3
Now the formula should be applied to compute the expected annual return for all assets which is show below
= A assets weightage × expected return + B assets weightage × expected return + C assets weightage × expected return
= 0.5 × 12% + 0.2 × 18% + 0.3 × 8%
= 6 + 3.6 + 2.4
= 12%
Hence, The expected annual return of this portfolio is 12%
