Question

An investment advisor has recommended a​ $50,000 portfolio containing assets​ R, J, and​ K; $25,000 will be invested in asset​ R, with an expected annual return of 12​ percent; $10,000 will be invested in asset​ J, with an expected annual return of 18​ percent; and​ $15,000 will be invested in asset​ K, with an expected annual return of 8 percent. The expected annual return of this portfolio is​ ________.

Answer 1

Answer: The expected annual return of this portfolio is 12%.

Step-by-step explanation:

Given that,

Total value of portfolio = $50,000

$25,000 will be invested in asset​ R and expected annual return of 12​ percent

$10,000 will be invested in asset​ J, with an expected annual return of 18​ percent

$15,000 will be invested in asset​ K, with an expected annual return of 8 percent

Expected return is the sum of their investment portfolio times their expected returns.

Return on portfolio =
`(25000)/(50000)*0.12 + (10000)/(50000)*0.18 + (15000)/(50000)*0.08`

= 0.06 + 0.036 + 0.024

= 0.12

= 12%

∴ The expected annual return of this portfolio is 12%.