What is expected return on a portfolio, Risk Management

Q. What is Expected Return on a Portfolio?

The Expected Return on a Portfolio is simply' the weighted average of the expected returns of the individual securities in the given portfolio. Where Rp = Expected Rate of Return in a Portfolio Wi = Proportion of total investment invested in that asset Rj = Expected Rate of return as the Security

n = number of securities in a given portfolio

Suppose your Expected Rate of Return from Agarawal Mills (AML) stock is 20 percent during a given holding period and the same rate of return in case of Gupta Mills (GM) scrip is, say 16 percent and you are interested in putting your total investment equally in both these securities, then the Expected

Rate of Return from the Two-Asset Portfolio is suppose you are interested in including the Tinkuji Mills scrip also into your Portfolio, by partly selling of your earlier investment in Gupta Mills, say about 20 percent of total investment and if your Expected Rate of return from Tinkuji Mills in 22 percent during the same said holding period, then the Return from the Asset Portfolio would be Portfolio Risk.

We have seen that the Portfolio Rates of Return are just the weighted average rates of Return of individual assets in the given portfolio. But the calculation of portfolio risk is not similar to weighted average of individual assets' total risk. Portfolio's risk is sometimes substantially different from individual assets risk. It is quite possible that the individual assets may be substantially risky with sizeable Standard Deviations and when combined may result in a Portfolio which is absolutely riskless.

Posted Date: 6/19/2013 7:39:34 AM | Location : United States







Related Discussions:- What is expected return on a portfolio, Assignment Help, Ask Question on What is expected return on a portfolio, Get Answer, Expert's Help, What is expected return on a portfolio Discussions

Write discussion on What is expected return on a portfolio
Your posts are moderated
Related Questions
Question 1 (a)  Prepayment refers to paying principal on a security before the due date. Prepayment risk is the risk associated with the early unscheduled return of principal

explain importance of informal sector in economy

As you know, utility functions incorporate a decision maker's attitude towards risk. Let's assume that the following utilities were assessed for Stephanie Parker. x

What is Systematic Risk Variability in a security's total returns which is directly associated with overall  movements  in  the  general  market  or  economy  is  known as syst

Question: (a) What are the two major types of risk analysis? (b) Which type is generally used in risk analysis of information systems and why? (c) Explain the methodology

QUESTION 1 Discuss the following terms with supported examples (a) Country risks (b) Funding risks (c) Market risks QUESTION 2 Total return swaps are used by f

Question: (a) Discuss the potential health risk which composting can pose to workers or to those located near a facility. (b) A number of concerns have been identified in

An insurance company is investigating offering kidnap and ransom insurance. Policies are to be sold to multinational companies to provide cover for certain named employees who are

Problem: (a) What are the two primary stages of Risk Management of a project? (b) What are the formalities to consider in a Project Termination Phase? (c) Briefly explain

What are the solution for over trading that has caused for expanding operation