Your portfolio consists of $3000 in ABC shares, $4500 of DEF shares and $2500 of GHI shares.Expected rates of return are ABC 5%, DEF 12% and GHI 16%.What is the portfolio expected rate of return?
A)10.9%
B)12.0%
C)11.4%
D)16.0%

Question

Quizplus · Accepted Answer

The expected rate of return for the portfolio is calculated by taking the weighted average of the expected returns of each component. For ABC: ($3000/$10000)*5% = 1.5%, for DEF: ($4500/$10000)*12% = 5.4%, and for GHI: ($2500/$10000)*16% = 4.0%. Adding these together gives 1.5% + 5.4% + 4.0% = 10.9%.

Your Portfolio Consists of $3000 in ABC Shares, $4500 of DEF