The following are the expected returns on a portfolio of investments. What is the expected rate of return on the portfolio?

Investment # of shares Price per share Expected return

A. 2000 $20 10%

B. 3000 $10 15%

C. 1000 $15 8%

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Expert Solution

Investment	#of shares (A)	Price per share (B)	Expected return	A X B
A.	2000	$20	10%	$40,000	(2000*2=40,000)
B.	3000	$10	15%	$30,000	(3000*10=30,000)
C.	1000	$15	8%	$15,000	(1000*15=15,000)

Investment	Value	Return (A)	Weight (B)	A X B	Weights Calculation	Return
A	$40,000	10%	47%	4.71%	(40,000/85,000=47%)	(47%*10%=4.71%)
B	$30,000	15%	35%	5.29%	(30,000/85,000=35%)	(35%*15%=5.29%)
C	$15,000	8%	18%	1.41%	(15,000/85,000=18%)	(18%*8%=1.41%)
Total	$85,000	Expected PortfolioReturn		11.41%
					Expected Portforlio Return = (4.71%+5.29%+4.41%)=11.41%

Expected Portforlio Return = (4.71%+5.29%+4.41%)=11.41%

Junaid answered 1 year ago

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