Calculate the expected return from a portfolio consisting of three securities with the following expected returns and weights:
A)0.114%
B)12%
C)11.4%
D)36%

Question

Calculate the expected return from a portfolio consisting of three securities with the following expected returns and weights: 
A)0.114% 
B)12% 
C)11.4% 
D)36%

Quizplus · Accepted Answer

The expected return from a portfolio can be calculated as the weighted average of the expected returns of the securities in the portfolio.

Expected Return = (Weight of Security 1 x Expected Return of Security 1) + (Weight of Security 2 x Expected Return of Security 2) + (Weight of Security 3 x Expected Return of Security 3)

Given the weights and expected returns of the securities, we can plug them into the formula:

Expected Return = (0.2 x 0.10) + (0.5 x 0.12) + (0.3 x 0.14)
Expected Return = 0.02 + 0.06 + 0.042
Expected Return = 0.122 or 12.2%

Therefore, the correct answer is C, 11.4%.

Calculate the Expected Return from a Portfolio Consisting of Three