What is the expected return of the three stock portfolio described below? $$\begin{array} { l c c }
\text { Common Stock } & \text { Market Value } & \text { Expected Return } \
\hline \text { Xerox } & 125,000 & 8 \% \
\text { Yelcon } & 250,000 & 25 \% \
\text { Zwiebal } & 175,000 & 16 \%
\end{array}$$
A)18.27%
B)14.33%
C)16.33%
D)12.72%
E)16.45%

Question

What is the expected return of the three stock portfolio described below? $$\begin{array} { l c c } 
\text { Common Stock } & \text { Market Value } & \text { Expected Return } \
\hline \text { Xerox } & 125,000 & 8 \% \
\text { Yelcon } & 250,000 & 25 \% \
\text { Zwiebal } & 175,000 & 16 \%
\end{array}$$
A)18.27%
B)14.33%
C)16.33%
D)12.72%
E)16.45%

Quizplus · Accepted Answer

The expected return of the portfolio is the weighted average of the expected returns of the individual stocks, where the weights are the market values of the stocks. Therefore, the expected return of the portfolio is:(0.125 * 0.08) + (0.250 * 0.25) + (0.175 * 0.16) = 0.1827 = 18.27%

What Is the Expected Return of the Three Stock Portfolio