What is the expected rate of return on a portfolio 18% of which is invested in an S&P 500 Index fund, 65% in a technology fund, and 17% in Treasury Bills. The expected rate of return is 11% on the S&P Index fund, 14% on the technology fund and 2% on the Treasury Bills.
A) 10.25%
B) 8.33%
C) 11.42%
D) 9.00%

Question

Quizplus · Accepted Answer

To calculate the expected rate of return, we use the weighted average formula:

Expected Rate of Return = (Weight 1 * Return 1) + (Weight 2 * Return 2) + (Weight 3 * Return 3)

Plugging in the given values, we get:

Expected Rate of Return = (0.18 * 0.11) + (0.65 * 0.14) + (0.17 * 0.02)

Expected Rate of Return = 0.0198 + 0.091 + 0.0034

Expected Rate of Return = 0.1142 or 11.42%

Therefore, the best choice is C.

What Is the Expected Rate of Return on a Portfolio