Calculate the Expected Return from a Portfolio Consisting of Three

question 68

Multiple Choice

Calculate the expected return from a portfolio consisting of three securities with the following expected returns and weights:

• A)0.114%
• B)12%
• C)11.4%
• D)36%

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Definitions:

Risk-Free Asset

An investment that is expected to deliver its return with certainty, with government bonds often considered as the closest example.

Risky Portfolio

An investment portfolio that contains assets with higher volatility and potential for significant variations in returns, offering the possibility of higher gains at the risk of greater losses.

Expected Rate of Return

The average return that an investor anticipates to earn on an investment, considering all potential outcomes and their probabilities.

Expected Return

The weighted average of all possible returns for a given investment, considering the probabilities of each outcome.