Compute expected return on a portfolio

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Reference no: EM1364760

What is the expected return on a portfolio if an equal amount is invested in each stock? What would be expected return if 50 percent of your funds is invested in stock A and the remaining funds are split evenly between stocks B and C?

Stock A 7%
Stock B 12
Stock C 20

You are considering two stocks and have determined the following information.

Stock A
Return Probability of the Return
18% 25%
14 50
10 25

Stock B
Return Probability of the Return
22% 10%
12 60
11 30

A. Which of the two stocks has the higher expected return?
B. Which stock is riskier?
C. Given your answers to the two previous questions, what stock is preferred?

Reference no: EM1364760

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