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: (a) What is the objective of risk management? (b) Define the term risk avoidance. (c) Define and describe the Methodology of process approach in ISO 9000. (d

discuss the post-loss objectives that would help firm recover

Question 1: (a) Employers should conduct proper health risk assessment in order to identify and control health risks before they lead to losses. Describe the four stages invo

What is the monetary certainty equivalent, Risk Management

QUESTION 1 A. Answer all of the following (a) What is risk appetite? (b) List any two risk responses (c) What does ITIL stand for? (d) What is a business case? (

(i) Calculate the unweighted average daily variance for the time series. Explain any assumptions or simplifications you have made, and the working for each step.

Data Security: An important issue for all organisations is the security of data. Just as documentation require physical security in the face of risk of theft / fire etc, electr

A person is willing to sell some stock at Rs 500000 after one year from now. The risk free rate is 7% and the risk premium is estimated at 8%. I the person is intending to enter a


Question 1: (i) Define the following by giving an example: (a) Systemic risk (b) Diversifiable risk (ii) List and describe briefly the different types of ri