A portfolio is invested 19 percent in Stock G, 34 percent in Stock J, and 47 per

Question

A portfolio is invested 19 percent in Stock G, 34 percent in Stock J, and 47 percent in Stock K. The expected returns on these stocks are 8.5 percent, 11 percent, and 16.4 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 19 percent in Stock G, 34 percent in Stock J, and 47 percent in Stock K. The expected returns on these stocks are 8.5 percent, 11 percent, and 16.4 percent, respectively.

Explanation / Answer

Portfolios expected return = w1r1+w2r2+w3r3

wn coreesponds to % of assets invested in stock 1

rn returns from nth stock

Portfolios Expected Return=0.19*0.085+0.34*0.11+.47*.164

                                        =0.13063

Portfolios Expected Return=13.06%

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