Question

A portfolio is invested 22 percent in Stock G, 50 percent in Stock J, and 28 percent in Stock K. The expected returns on these stocks are 7 percent, 13 percent, and 17 percent, respectively. What is the portfolio's expected return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

The expected return of the portfolio is 12.8%

Explanation:

A portfolio is invested 22% on stock G, 50% on stock J and 28% on stock K.

The expected return on stock G is 7%, on stock J is 13% and on stock K is 17%.

Weighted return on stock G

= 0.22*7%

=1.54%

Weighted return on stock J

=0.50*13%

=6.5%

Weighted return on stock K

=0.28*17%

=4.76%

The expected return on the portfolio

=Weighted return on stock G+Weighted return on stock J+Weighted return on stock K

=(1.54+6.5+4.76)%

=12.8%