Question

You own a portfolio that is 15 percent invested in Stock X, 30 percent in Stock Y, and 55 percent in Stock Z. The expected returns on these three stocks are 8 percent, 11 percent, and 13 percent, respectively. What is the expected return on the portfolio

Answer 1

0.1165 or 11.65%

Step-by-step explanation:

The expected return of a portfolio is the sum of the weight of each asset times the expected return of each asset. So, the expected return of the portfolio is:

E(rp) = 0.15(0.08) + 0.30(0.11) + 0.55(0.13)

E(rp) = 0.012 + 0.033 + 0.0715

E(rp) = 0.1165