Consider the following information: The possible rate of return for a portfolio for an investment is shown below. Probability Possible rate of return 0.25 0.09 0.25 0.11 0.25 0.13 0.25 0.16 What is the expected rate of return for the investment?

Consider the following information: The possible rate of return for a portfolio for an investment is shown below. Probability Possible rate of return 0.25 0.09 0.25 0.11 0.25 0.13 0.25 0.16 What is the expected rate of return for the investment?

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter14: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 8LTAI

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Concept explainers

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.

Question

100%

Consider the following information: The possible rate of return for a portfolio for an investment is shown below.
Probability Possible rate of return
0.25 0.09
0.25 0.11
0.25 0.13
0.25 0.16
What is the expected rate of return for the investment?

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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