Question

Adelson Wick has invested $4,320 in Microsoft, $1,500 in Tesla and $2,750 in Google. He expects to earn 14 percent in Microsoft, 15 percent in Tesla and 16 in Google. What is Adelson expected return on this portfolio?

Group of answer choices

11.76 percent

13.57 percent

13.82 percent

14.80 percent

None of the above

Answer 1

Comptation of the Expected Return of the Portfolio.
Expected Return of the portfolio(Rp) is = Ri*Wi
Where, Ri = Return on respective investment               Wi= Weight of the respective investment
Investment	Investment Amount in $	**Weight of the Investment	Expected Return	Ri*Wi
	(a)	(b)
Microsoft	4320	0.5041	14.00%	7.1%
Tesla	1500	0.1750	15.00%	2.6%
Google	2750	0.3209	16.00%	5.1%
Total	8570	1.0000		14.8%
** Weight of the Investment is calculated by dividing the amount of respective investment amount by the total investment amount
Conclusion: Thus the expected return of the portfolio is 14.80%