Portfolio Weighted Average Return Calculation | CFA Level 1 Exam Prep

Portfolio Weighted Average Return Calculation

Prev Question Next Question

Question

You are examining a portfolio composed of 10% money-market investments, 30% bonds, and 60% stocks. Last year, the return on the money-market investments was 4%; the return on bonds was 6%, and the return on stocks was 7%. What is the portfolio weighted average return?

Answers

Explanations

Click on the arrows to vote for the correct answer

A. B. C. D.

C

The portfolio weighted-average mean return is equal to the sum (as i goes from 1 to n) of w_i * X_i, where w_i is the percentage weight in the portfolio of the ith asset, and X_i is the investment return of the ith asset. Here, we get a weighted mean of 0.10 * 0.04 + 0.30 * 0.06 + 0.60 * 0.07 = 6.40%.

Prev Question Next Question