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Weighted Average Return on a Portfolio

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Stock A has an expected return of 10% per year and stock B has an expected return of 20%. If 30% of the funds are invested in stock A, and the rest in stock B, what is the expected return on the portfolio of stock A and stock B? Justify your answer.

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Solution Summary

Given the returns on the stocks in a portfolio and their portions of the portfolio, this solution demonstrates how to compute the portfolio's weighted-average return.

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The expected value of a portfolio is the sum of the weighted-average expected return of each of the securities in the portfolio. Therefore, the ...

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