Question

In your portfolio, you have 30% invested in Stock A, 10% in Stock B, and 60% in Stock C. The expected returns on these three stocks are 9 percent, 12 percent, and 6 percent, respectively. What is the expected return on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Multiple Choice 8.70% 7.50% 9.15% 8.25% 8.86%  

Answer 1

answer is option 2 = Expected return of the portfolio = 7.50%

table with information given in the question

secuurity	return (%)	proportion of investment
A	9	0.3
B	12	0.1
C	6	0.6

Expected return of the portfolio = ∑ x_i r_i   ( summation of proportion of the investment * expected return of security)

Expected return of the portfolio = (0.3 * 9) + (0.1 * 12) + (0.6 * 6)

Expected return of the portfolio = 2.7 + 1.2 + 3.6

Expected return of the portfolio = 7.50%