You own a portfolio that is 15 percent invested in Stock X, 30 percent in Stock Y, and 55 percent in Stock Z. The expected returns on these three stocks are 8 percent, 11 percent, and 13 percent, respectively. What is the expected return on the portfolio

Question

Aisha Grimes

Business

25 August, 21:09

You own a portfolio that is 15 percent invested in Stock X, 30 percent in Stock Y, and 55 percent in Stock Z. The expected returns on these three stocks are 8 percent, 11 percent, and 13 percent, respectively. What is the expected return on the portfolio

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Answers (1)

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Vance Mendoza · Answer 1

0.1165 or 11.65%

Explanation:

The expected return of a portfolio is the sum of the weight of each asset times the expected return of each asset. So, the expected return of the portfolio is:

E (rp) = 0.15 (0.08) + 0.30 (0.11) + 0.55 (0.13)

E (rp) = 0.012 + 0.033 + 0.0715

E (rp) = 0.1165