The following are the expected returns on a portfolio of investments. What is th

Question

The following are the expected returns on a portfolio of investments. What is the expected rate of return on the portfolio?

investment                   # of shares               price per share        expected return

a.                                    2000                               $20                           10%

b.                                    3000                               $10                             15%

c.                                    1000                                $15                                 8%

Type your formula and solve in the cell below (for excel) please show formula and answer

Explanation / Answer

Solution:

In statistics, a weighted average is an average that takes each object and calculates the product of its weight and its figure and sums all of these products to produce one average. It is implied that all the individual weights add to 1.

investment                                 # of shares price per share         expected return weight of shares Expected return decimal equivalent expected return a 2000 $20 10% 0.333333333 0.1 0.0333333 b 3000 $10 15% 0.5 0.15 0.075 c 1000 $15 8% 0.166666667 0.08 0.0133333 6000 0.1216667

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