You have invested 40 percent of your portfolio in an investment with an expected return of 12 percent and 60 percent of your portfolio in an investment with an expected return of 20 percent. What is the expected return of your portfolio?
A) 15.2%
B) 16.0%
C) 16.8%
D) 17.6%

Question

Quizplus · Accepted Answer

The expected return of the portfolio can be calculated by multiplying the weight of each investment by its expected return and then summing these products. For the first investment: 0.40 * 12% = 4.8%. For the second investment: 0.60 * 20% = 12%. Adding these together gives an expected return of 16.8% for the portfolio.

You Have Invested 40 Percent of Your Portfolio in an Investment