Question

You own a portfolio that is 30 percent invested in Stock X, 20 percent in Stock Y, and 50 percent in Stock Z. The expected returns on these three stocks are 9 percent, 15 percent, and 11 percent, respectively. What is the expected return on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

11.2%

Explanation:

We need to calculate the weighted return of the portfolio. You have to multiply each stock's weight by the expected return.

• Stock X = 0.30 x 9% (expected return) = 2.7%
• Stock Y = 0.20 x 15% (expected return) = 3%
• Stock Z = 0.50 x 11% (expected return) = 5.5%
• weighted return of the portfolio = 2.7% + 3% + 5.5% = 11.2%