Based on the investment portfolio information shown below, what
is the portfolio’s expected return?
Stock
Investment
Return
X
$250,000
13.4%
Y
$400,000
10.9%
Z
$350,000
11.7
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Finance
Based on the investment portfolio information shown below, whatis the portfolio’s expected return?
Stock
Investment
Return
X
$250,000
13.4%
Y
$400,000
10.9%
Z
$350,000
11.7
Answer & Explanation
Solved by verified expert
3.5 Ratings (577 Votes)
Portfolio's expected return is 11.81%
Step-1:Calculation of weight of investment of portfolio
Stock
Investment
X
$ 2,50,000
Y
$ 4,00,000
Z
$ 3,50,000
Total
$ 10,00,000
Weight of
stock:
X
$ 2,50,000
/
$
10,00,000
=
0.25
Y
$ 4,00,000
/
$
10,00,000
=
0.40
Z
$ 3,50,000
/
$
10,00,000
=
0.35
Total
1.00
Step-2:Calculation of portfolio's expected return
Weight
Return
a
b
a*b
X
0.25
13.40%
3.35%
Y
0.40
10.90%
4.36%
Z
0.35
11.70%
4.10%
Portfolio's expected return
11.81%
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