To calculate the expected return of a portfolio, you need to know the expected return and weight of each asset in a portfolio. The figure is found by multiplying each asset’s weight with its expected return, and then adding up all those figures at the end.

What is the purpose of an expected return?

Expected return is simply a measure of probabilities intended to show the likelihood that a given investment will generate a positive return, and what the likely return will be. The purpose of calculating the expected return on an investment is to provide an investor with an idea of probable profit vs risk.

Why do you diversify your portfolio?

Diversification is the practice of spreading your investments around so that your exposure to any one type of asset is limited. This practice is designed to help reduce the volatility of your portfolio over time. One way to balance risk and reward in your investment portfolio is to diversify your assets.

How do I calculate my portfolio return?

The simplest way to calculate a basic return is called the holding period return. Here’s the formula to calculate the holding period return: HPR = Income + (End of Period Value – Initial Value) ÷ Initial Value.

What is the expected return on an investment portfolio?

To illustrate the expected return for an investment portfolio, let’s assume the portfolio is comprised of investments in three assets – X, Y, and Z. $2,000 is invested in X, $5,000 invested in Y, and $3,000 is invested in Z. Assume that the expected returns for X, Y, and Z have been calculated and found to be 15%, 10%, and 20%, respectively.

How do you calculate the expected return of an asset?

The basic expected return formula involves multiplying each asset’s weight in the portfolio by its expected return, then adding all those figures together. The expected return is usually based on historical data and is therefore not guaranteed.

What is the purpose of the expected return?

Which is correct concerning the standard deviation of a portfolio?

I. the amount of money currently invested in each individual security / II. various levels of economic activity II. the performance of each stock given various economic scenarios V. the probability of various states of the economy Which one of the following statements is correct concerning the standard deviation of a portfolio?