Question

You own a portfolio that is 22 percent invested in Stock X, 37 percent in Stock Y, and 41 percent in Stock Z. The expected returns on these three stocks are 12 percent, 15 percent, and 17 percent, respectively. What is the expected return on the portfolio?

Answer 1

15.16%

Step-by-step explanation:

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

Expected return on portfolio = (Return on Stock X × Weight of Stock X) + (Return on Stock Y × Weight of Stock Y) + (Return on Stock Z × Weight of Stock Z)

= (12% × 22%) + (15% × 37%) + (17% × 41%)

= 2.64% +5.55% + 6.97%

= 15.16%

So, for computing the expected return on the portfolio we simply applied the above formula.