Question

Consider a $40,000 portfolio consisting of three stocks. Their values and expected returns are as follows: Stock Investment Expected Return A $ 5,000 15 % B 15,000 8 C 20,000 23 What is the weighted-average expected return on the portfolio?

Answer 1

Answer: 16.38%

Explanation:

The weighted average return of the portfolio is calculated (as implied) by taking the weights of the different stocks and multiplying by their returns.

= (5,000/40,000 * 15%) + (15,000/40,000 * 8%) + (20,000/40,000 * 23%)

= ‭0.01875‬ + 0.03 + ‭0.115‬

= ‭0.16375‬

= 16.38%