# Expected rate of return on the portfolio

RETURNS

State of Economy Probability of State Stock A Stock B Stock C

Boom .10 22% 18% 5%

Normal .85 14% 13% 11%

Recession .05 -28% 4% 17%

4. You have a portfolio that is equally weighted among stocks A, B, and C. What is the

expected return on your portfolio?

a. 11.87 percent

b. 12.15 percent

c. 12.22 percent

d. 12.48 percent

https://brainmass.com/business/modified-internal-rate-of-return/expected-rate-return-portfolio-285901

#### Solution Preview

To calculate the expected rate of return on the portfolio, we first calculate the expected return under each state of economy.

Since the stock are equally weighted, the proportion is 1/3 each

Expected ...

#### Solution Summary

The solution explains how to calculate the expected rate of return on the portfolio.

$2.19