Question

Three investment portfolios are shown below.

ROR Portfolio 1 Portfolio 2 Portfolio 3
-3.8% $700
$1,250
$1,025
2.1% $2,575
$1,700
$500
11.3% $220
$1,515
$790
5.8% $1,000
$1,345
$250
1.6% $1,430
$1,675
$2,500
Using technology, calculate the weighted average of the RORS for each portfolio. Based on the results, which list shows a
comparison of the overall performance of the portfolios, from best to worst?
Portfolio 1, Portfolio 3, Portfolio 2
O Portfolio 2, Portfolio 3, Portfolio 1
Portfolio 1, Portfolio 2, Portfolio 3
O Portfolio 3, Portfolio 2, Portfolio 1

Answer 1

The weighted average of the RORS for each portfolio is:
Portfolio 1: (-3.8% x $700) + (2.1% x $2,575) + (11.3% x $220) + (5.8% x $1,000) + (1.6% x $1,430) = $75.65
Portfolio 2: (-3.8% x $1,250) + (2.1% x $1,700) + (11.3% x $1,515) + (5.8% x $1,345) + (1.6% x $1,675) = $98.02
Portfolio 3: (-3.8% x $1,025) + (2.1% x $500) + (11.3% x $790) + (5.8% x $250) + (1.6% x $2,500) = $75.70

Based on the results, the overall performance of the portfolios, from best to worst, is:
Portfolio 2, Portfolio 3, Portfolio 1.