Question

A portfolio is invested 18 percent in Stock G, 58 percent in Stock J, and 24 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?

Answer 1

The portfolio´s expected return is 12.88%

Step-by-step explanation:

Hi, in order to find the expected return of this portfolio, we need to use the wheighted average formula with the information given. That is as follows.

`E(r)=G(percentage)*G(return)+J(percentage)*J(return)+K(percentage)*K(return)`

It should look like this.

`E(r)=0.18*0.07+0.58*0.13+0.24*0.17=0.1288`

Therefore, the expected return of this portfolio is 12.88%

Best of luck