A portfolio is invested 23 percent in Stock G, 38 percent in Stock J, and 39 per

Question

A portfolio is invested 23 percent in Stock G, 38 percent in Stock J, and 39 percent in Stock K. The expected returns on these stocks are 10 percent, 12.5 percent, and 17.9 percent, respectively.

What is the portfolio’s expected return? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).

A portfolio is invested 23 percent in Stock G, 38 percent in Stock J, and 39 percent in Stock K. The expected returns on these stocks are 10 percent, 12.5 percent, and 17.9 percent, respectively.

Explanation / Answer

Answer: Calculation of the portfolio’s expected return:

ERp=0.10*0.23+0.125*0.38+0.179*0.39

=0.023+0.0475+0.06981

=14.031%

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