You own a portfolio that is invested 50 percent in stock A, 15 percent in stock

Question

You own a portfolio that is invested 50 percent in stock A, 15 percent in stock B, and the remainder in stock C. The expected returns on these stocks are 14.45 percent, 15.6 percent, and 12.33 percent, respectively. What is the expected return on the portfolio? You own a portfolio that is invested 50 percent in stock A, 15 percent in stock B, and the remainder in stock C. The expected returns on these stocks are 14.45 percent, 15.6 percent, and 12.33 percent, respectively. What is the expected return on the portfolio?

Explanation / Answer

percent in C=1-.15-.50=.35

expected return on the portfolio=percent invested in A* expected return of A+percent invested in B* expected return of B+percent invested in C* expected return of C

expected return on the portfolio=.50*14.45+.15*15.6 +.35*12.33 percent

expected return on the portfolio=13.88 percent

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