Question

ou have ​$68000. You put 24​% of your money in a stock with an expected return of 13​%, ​$39 000 in a stock with an expected return of 18​%, and the rest in a stock with an expected return of 21​%. What is the expected return of your​ portfolio?

Answer 1

Amount invested in first stock = $68,000 * 0.24 = $16,320

Amount invested in second stock = $39,000

Amount invested in third stock = $68,000 - $16,320 - $39,000 = $12,680

Expected return of your​ portfolio = (Weight of first stock * Expected return of first stock) + (Weight of second stock * Expected return of second stock) + (Weight of third stock * Expected return of third stock)

Expected return of your​ portfolio = [($16,320/$68,000) * 0.13] + [($39,000/$68,000) * 0.18] + [($12,680/$68,000) * 0.21]

Expected return of your​ portfolio = 0.1736 or 17.36%