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You own a portfolio that is invested 35% in Stock X, 20% in Stock Y, and 45% in Stock Z. The expected returns on these stocks are 8% and 11%, respectively, what is the expected return on the portfolio ?

You own a portfolio that is invested 35% in Stock X, 20% in Stock Y, and 45% in Stock Z. The expected returns on these stocks are 8% and 11%, respectively, what is the expected return on the portfolio ?

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Portfolio expected returns

Portfolio: The group of total assets invested in stocks and bonds collectively held by the investor is referred to as portfolio.

Portfolio expected return: Portfolio expected return is the sum of all the probable percentages expected times of weight of the respective assets in portfolio weight.

Determine the expected return of the portfolio.

Stocks in Portfolio

Portfolio Weights

Expected Return

Expected Portfolio Return

Stock X

0.35

0.08

0.0280

Stock Y

0.20

0.16

0.0320

Stock Z

0.45

0.11

0.0495

Portfolio expected return, E (R p )

0.1095

Therefore, the expected return on portfolio, E(Rp) is .

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