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    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 Preview

    Please see attached file:
    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 ...

    Solution Summary

    Calculates expected return on a portfolio composed of 3 assets.

    $2.19

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