Question

ou own a portfolio that is 30 percent invested in Stock X, 20 percent in Stock Y, and 50 percent in Stock Z. The expected returns on these three stocks are 11 percent, 17 percent, and 13 percent, respectively. What is the expected return on the portfolio

Answer 1

The expected return on the portfolio is:

= 13.2%

Step-by-step explanation:

a) Data and Calculations:

Portfolio

Stock Percentage Expected Weighted

Holding Returns Returns

Stock X 30% 11% 3.3%

Stock Y 20% 17% 3.4%

Stock Z 50% 13% 6.5%

Total 100% 13.2%

b) The expected return on the portfolio is the addition of the weighted returns from each investment. The weighted returns are obtained by multiplying the percentage holding of each stock with its expected returns.