Pierre invested equally in CJD, JCD, and JFD stocks with different expected returns. To find the portfolio's expected return, we weight each stock's return by its investment amount and average them. This gives a rounded estimate of roughly 7.7%, reflecting the combination of individual expected returns.
To calculate the weighted average expected return for Pierre's portfolio, we need to consider the investment amount in each stock and its corresponding expected return. Here's how we can do it:
1. Multiply each investment amount by its respective expected return:
- CJD: 3000 * 6% = 180
- JCD: 3000 * 7% = 210
- JFD: 3000 * 10% = 300
2. Sum the products from step 1:
- Total returns = 180 + 210 + 300 = 690
3. Divide the total returns by the total investment amount (which is 9000 because 3000 x 3):
- Weighted average return = 690 / 9000 = 0.0767
4. Round the answer to the nearest tenth:
- Weighted average return ≈ 7.7%
Therefore, the weighted average expected return for Pierre's portfolio is closest to 7.7%.