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7 June, 12:20

You own a portfolio that is 32 percent invested in Stock X, 20 percent invested in Stock Y, and 48 percent invested in Stock Z. The expected returns on these three stocks are 6 percent, 19 percent, and 15 percent, respectively. What is the expected return on the portfolio?

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  1. 7 June, 14:52
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    The current portfolio has three stocks X, Y and Z and expected returns are are 6 percent, 19 percent, and 15 percent respectively.

    Explanation:

    The formula to calculate expected returns of the portfolio is:

    Weighted return = Probability * Expected Return

    The sum of weighted return is the expected return of the portfolio

    Weighted return = (32% x 6% = 1.9%) + (20% x 19% = 3.8%) + (48% x 15% = 7.2%)

    Expected return on portfolio = (1.9% + 3.8% + 7.2% = 12.9%)

    The expected return of the portfolio is 12.9%
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