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17 July, 02:25

You own a portfolio that is 28 percent invested in Stock X, 43 percent in Stock Y, and 29 percent in Stock Z. The expected returns on these three stocks are 9 percent, 12 percent, and 14 percent, respectively. What is the expected return on the portfolio

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  1. 17 July, 06:11
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    The answer is 0.1174 or 11.74 %

    Explanation:

    Solution

    Given that:

    Stock X = 28%

    Stock Y = 43%

    Stock Z = 29%

    The expected returns for the three stock are = 9%, 12%, 14 %

    The next step is to find the portfolio expected return

    Thus,

    the formula for expected return on the portfolio is given below:

    Expected return of portfolio = WxRx + WyRy + WzRz

    = (0.28 * 0.09) + (0.43 * 0.12) + (0.29 * 0.14)

    =0.0252 + 0.0516 + 0.0406

    = 0.1174 or 11.74%
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