Expected return on the portfolio
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Calculate the expected return on the portfolio. [E (R)] of the following assets. If you invest 20% in asset 1, 30% in asset 2, AND 50% in asset 3.
How and why will your answer change if you shift 20% of invested funds from the least risky asset 3 to the most risky asset 1 asset?
Asset
1. 10%
2. 7%
3. 6%
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Solution Summary
Calculates expected return on a portfolio composed of 3 assets.
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Calculate the expected return on the portfolio. [E (R)] of the following assets. If you invest 20% in asset 1, 30% in asset 2, AND 50% in asset 3.
Asset
1. 10%
2. 7%
3. 6%
Expected return = w1 r1 + w2 r2 + w3 r3
where w1, w2 and w3 are proportions invested in 1,2 and 3
and r1, r2 ...
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