Question

A portfolio is invested 20 percent in Stock G, 60 percent in Stock J, and 20 percent in Stock K. The expected returns on these stocks are 9 percent, 15 percent, and 21 percent, respectively. What is the portfolio's expected return

Answer 1

the expected return on the portfolio is 15%

Step-by-step explanation:

The computation of the expected return on the portfolio is shown below:

The Portfolio expected return is

= (Respective returns × Respective probabilities)

= (0.2 × 0.09) + (0.6 × 0.15) + (0.2 × 0.21)

= 15%.

Hence, the expected return on the portfolio is 15%

Basically we applied the above formula for the same.