Question

You own a portfolio that is 34 percent invested in Stock X, 22 percent invested in Stock Y, and 44 percent invested in Stock Z. The expected returns on these three stocks are 11 percent, 18 percent, and 14 percent, respectively. What is the expected return on the portfolio

Answer 1

Answer:

13.86%

Explanation:

34% was invested into stock X with an expected return of 11%

22% was invested into stock Y with an expected return of 18%

44% was invested into stock Z with an expected return of 14%

The expected return on the portfolio can be calculated using the formula below

Expected return= Sum of ( weight of stock×return of stock)

= (0.34×11%)+(0.22×18%)+(0.44×14%)

= 3.74+3.96+6.16

= 13.86%

Hence the expected return on the portfolio is 13.86%