Question

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

Answer 1

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%