Question

a portfolio has been constructed from the following securities: security expected return amount invested allegheny energy 6% $32,500 peoples technology 16% $22,300 glass city bank 12% $31,200 what is the expected rate of return from this portfolio? (2 points) the expected return from a portfolio is the weighted average of the expected returns of its component securities:

Answer 1

The expected return to be 9.262%.

What is expected return?

A future return that is anticipated to be generated on an asset. also known as the expected return.

three different forms of returns

Interest. Interest is paid on investments like bonds, GICs, and savings accounts. Dividends. Investors receive shares when some stocks pay dividends.

Capital gains If you're an investor, you can sell investments like stocks or bonds.

How to calculate anticipated return:

Security A

Return predicted is 6%.

32500 was invested.

Weight = 32,500/10,000,000 = 0.32.

expected return : 6*0.325 = 1.95

Security B

Return anticipated is 16%

22300 invested is 22300/100000, which equals 0.223.

Return anticipated: 16*0.223 = 3.568

Security C

Return anticipated is 12%.

Weight = 31200/100000=0.312 Investment = 31200

Return anticipated: 12 * 0.312 = 3.744

Therefore total expected return is  

1.95+ 3.568 + 3.755

9.262 %

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