Your portfolio consists of $3,000 in ABC stock, $4,500 of DEF stock and $2,500 of GHI stock. Expected rates of return are ABC 5%, DEF 12%, and GHI 16%. What is the portfolio expected rate of return?
A) 10.9%
B) 12.0%
C) 11.4%
D) 16.0%

Question

Quizplus · Accepted Answer

The expected rate of return for the portfolio is calculated by taking the weighted average of the expected rates of return for each stock, based on the proportion of the total portfolio value that each stock represents. The calculation is as follows: [(3000/10000)*5%] + [(4500/10000)*12%] + [(2500/10000)*16%] = 0.15 + 0.54 + 0.4 = 1.09 or 10.9%.

Your Portfolio Consists of $3,000 in ABC Stock, $4,500 of DEF