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, respectfully?

Question

Quizplus · Accepted Answer

The expected return for the portfolio is calculated as follows:
Portfolio Expected Return = (Weight of Homer x Expected Return of Homer) + (Weight of Marge x Expected Return of Marge) + (Weight of Bart x Expected Return of Bart)
= (0.20 x 0.02) + (0.40 x 0.18) + (0.20 x 0.03)
= 0.004 + 0.072 + 0.006
= 0.082 or 8.2%
Therefore, the best choice is option B.

You Have Invested 20 Percent of Your Portfolio in Homer