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You have invested 30 percent of your portfolio in Jacob Inc., 40 percent in Bella Co.,...

You have invested 30 percent of your portfolio in Jacob Inc., 40 percent in Bella Co., and 30 percent in Edward Resources. What is the expected return of your portfolio if Jacob, Bella, and Edward have expected returns of 0.07, 0.19, and 0.03, respectfully

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Answer #1

Expected returns of Jacob Inc. is 0.07 and 30% of the portfolio is invested in Jacob Inc.
Expected returns of Bella Co. is 0.19 and 40% of the portfolio is invested in Bella Co.
Expected returns of Edward Resources is 0.03 and 30% of the portfolio is invested in Edward Resources
Total return=(Expected returns of Jacob Inc.)*(Percentage invested in Jacob Inc.)+(Expected returns of Bella Co.)*(Percentage invested in Bella Co.)+
(Expected returns of Edward Resources)*(Percentage invested in Edward Resources)
=0.07*30%+0.19*40%+0.03*30%
=0.021+0.076+0.009
=0.106 or 10.60%

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