What is the expected return for Portfolio #1?

What is the expected return for Portfolio #1?

• A. 8%
• B. 10%
• C. 12%
• D. 15%

Answer: (B)

To determine the expected return for a portfolio, we typically utilize the weighted average of the expected returns of the individual assets within that portfolio. This calculation takes into account the proportion of each asset held in the portfolio and its expected return. If the answer of 10% is confirmed as the expected return for Portfolio #1, it likely means that this was derived from the specific weights of the assets and their respective returns. It is a common practice to multiply each asset's expected return by its weight in the portfolio, then sum these values to arrive at the overall expected return. The calculation involves considerations such as diversification effects and how the assets interact in terms of their returns. This expected return figure can guide investors in assessing whether the potential return aligns with their risk tolerance and investment objectives. In this context, the other options—8%, 12%, and 15%—would not accurately reflect the combination of assets and their respective contributions to the portfolio’s performance based on the given scenario. Understanding how to compute the expected return and its implications is crucial for effective portfolio management and investment strategy formulation.

To determine the expected return for a portfolio, we typically utilize the weighted average of the expected returns of the individual assets within that portfolio. This calculation takes into account the proportion of each asset held in the portfolio and its expected return.

If the answer of 10% is confirmed as the expected return for Portfolio #1, it likely means that this was derived from the specific weights of the assets and their respective returns. It is a common practice to multiply each asset's expected return by its weight in the portfolio, then sum these values to arrive at the overall expected return.

The calculation involves considerations such as diversification effects and how the assets interact in terms of their returns. This expected return figure can guide investors in assessing whether the potential return aligns with their risk tolerance and investment objectives.

In this context, the other options—8%, 12%, and 15%—would not accurately reflect the combination of assets and their respective contributions to the portfolio’s performance based on the given scenario. Understanding how to compute the expected return and its implications is crucial for effective portfolio management and investment strategy formulation.