What is the expected return for a portfolio that has $1,000 invested in Stock X, $1,500 invested in Stock Y, and $2,500 invested in Stock Z, if the expected returns on Stock X, Stock Y, and Stock Z are 10%, 12%, and 15%, respectively?
A)11.90%
B)12.00%
C)12.50%
D)13.10%

Question

Quizplus · Accepted Answer

The expected return for the portfolio can be calculated by finding the weighted average of the expected returns of the stocks, based on the amount invested in each. The calculation is as follows: [(1000 * 0.10) + (1500 * 0.12) + (2500 * 0.15)] / (1000 + 1500 + 2500) = (100 + 180 + 375) / 5000 = 655 / 5000 = 0.131 or 13.10%.

What Is the Expected Return for a Portfolio That Has