You have invested 20 percent of your portfolio in Homer, Inc., 40 percent in Marge Co., and 20 percent in Bart Resources. What is the expected return of your portfolio if Homer, Marge, and Bart have expected returns of 2 percent, 18 percent, and 3 percent, respectively?
A) 7.7%
B) 8.2%
C) 8.7%
D) 9.2%

Question

Quizplus · Accepted Answer

To calculate the expected return of the portfolio, we need to multiply the weight of each investment by its expected return and sum the results. 
Expected portfolio return = (0.2 x 0.02) + (0.4 x 0.18) + (0.2 x 0.03) = 0.004 + 0.072 + 0.006 = 0.082 or 8.2%.
Therefore, the best choice is B.

You Have Invested 20 Percent of Your Portfolio in Homer