What is the expected return of the three stock portfolio described below? $$\begin{array} { l c c }
\text { Common Stock } & \text { Market Value } & \text { Expected Return } \
\hline \text { Del ton Inc. } & 50,000 & 10 \% \
\text { Efley Co. } & 40,000 & 11 \% \
\text { Grippon Inc. } & 60,000 & 16 \%
\end{array}$$
A)14.89%
B)16.22%
C)12.66%
D)13.85%
E)16.99%

Question

What is the expected return of the three stock portfolio described below? $$\begin{array} { l c c } 
\text { Common Stock } & \text { Market Value } & \text { Expected Return } \
\hline \text { Del ton Inc. } & 50,000 & 10 \% \
\text { Efley Co. } & 40,000 & 11 \% \
\text { Grippon Inc. } & 60,000 & 16 \%
\end{array}$$
A)14.89%
B)16.22%
C)12.66%
D)13.85%
E)16.99%

Quizplus · Accepted Answer

The expected return of the portfolio is calculated by taking the weighted average of the expected returns of the individual stocks. The weights are based on the market value of each stock relative to the total market value of the portfolio. Total market value = 50,000 + 40,000 + 60,000 = 150,000. The expected return = (50,000/150,000 * 10%) + (40,000/150,000 * 11%) + (60,000/150,000 * 16%) = 12.66%.

What Is the Expected Return of the Three Stock Portfolio