Consider the following table with information on the weightings and expected returns of three assets held by an FI. $$\begin{array} { | c | c | c | }
\hline \text { Loan } i & \text { Weight } i & \text { Expected return } i \
\hline 1 & 0.15 & 12.35 \% \
\hline 2 & 0.55 & 10.25 \% \
\hline 3 & 0.30 & 15.75 \% \
\hline
\end{array}$$ What is the expected return on the portfolio (round to two decimals)?
A)(0.15 * 12.35 + 0.55 * 10.25 + 0.30 * 15.75) / 3 = 4.07%
B)(0.15 * 12.35 + 0.55 * 10.25 + 0.30 * 15.75) * 3 = 36.66%
C)0.15 * 12.35 + 0.55 * 10.25 + 0.30 * 15.75 = 12.22%
D)(12.35 + 10.25 + 15.75) / 3 = 12.78%

Question

Consider the following table with information on the weightings and expected returns of three assets held by an FI. $$\begin{array} { | c | c | c | } 
\hline \text { Loan } i & \text { Weight } i & \text { Expected return } i \
\hline 1 & 0.15 & 12.35 \% \
\hline 2 & 0.55 & 10.25 \% \
\hline 3 & 0.30 & 15.75 \% \
\hline
\end{array}$$ What is the expected return on the portfolio (round to two decimals)?
A)(0.15 * 12.35 + 0.55 * 10.25 + 0.30 * 15.75) / 3 = 4.07%
B)(0.15 * 12.35 + 0.55 * 10.25 + 0.30 * 15.75) * 3 = 36.66%
C)0.15 * 12.35 + 0.55 * 10.25 + 0.30 * 15.75 = 12.22%
D)(12.35 + 10.25 + 15.75) / 3 = 12.78%

Quizplus · Accepted Answer

The expected return on the portfolio is calculated by multiplying each asset's expected return by its weight in the portfolio and then summing these products.

Consider the Following Table with Information on the Weightings and Expected