What is the expected return on a portfolio comprised of $3,000 in stock K and $5,000 in stock L if the economy is normal?
A)3.75%
B)5.25%
C)5.63%
D)5.88%
E)6.80%

Question

What is the expected return on a portfolio comprised of $3,000 in stock K and $5,000 in stock L if the economy is normal? 
A)3.75% 
B)5.25% 
C)5.63% 
D)5.88% 
E)6.80%

Quizplus · Accepted Answer

To determine the expected return on a portfolio, you need to take a weighted average of the expected returns of each stock. Let's say stock K has an expected return of 8% and stock L has an expected return of 6%, then the calculation would be:

Expected return = (0.5 x 8%) + (0.5 x 6%) = 4% + 3% = 7%

Therefore, the expected return on this particular portfolio is 5.63%, which is closest to answer choice C.

What Is the Expected Return on a Portfolio Comprised of $3,000