A portfolio consists of three stocks.There are 540 shares of Stock A valued at $24.20 share,310 shares of Stock B valued at $48.10 a share,and 200 shares of Stock C priced at $26.50 a share.Stocks A,B,and C are expected to return 8.3 percent,16.4 percent,and 11.7 percent,respectively.What is the expected return on this portfolio?
A)12.50 percent
B)11.67 percent
C)12.78 percent
D)12.47 percent
E)11.87 percent

Question

Quizplus · Accepted Answer

The expected return on the portfolio is calculated by finding the weighted average return of each stock. First, calculate the total value of each stock: - Stock A: 540 shares * $24.20/share = $13,068 - Stock B: 310 shares * $48.10/share = $14,911 - Stock C: 200 shares * $26.50/share = $5,300 Then, calculate the total value of the portfolio: $13,068 + $14,911 + $5,300 = $33,279 Next, find the proportion of each stock in the portfolio and multiply by its expected return: - Stock A: ($13,068 / $33,279) * 8.3% = 3.24% - Stock B: ($14,911 / $33,279) * 16.4% = 7.32% - Stock C: ($5,300 / $33,279) * 11.7% = 1.87% Finally, add these weighted returns to find the expected return of the portfolio: 3.24% + 7.32% + 1.87% = 12.43% Rounding to two decimal places, the closest answer is 12.47 percent (D).

A Portfolio Consists of Three Stocks