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
Q. Capital market line? When their exists complete agreement between all investor with regards to a security Expected return, variance and covariance as well as on the rate of

Question: (a) What are the various options to mitigate risks in an Information Security Management System (ISMS)? For each option specify an instance where it can be used.

the difference between binomial model and black-scholes formulation of derivative pricimg

Question: a) (i) Define and explain the term environmental management'. (ii) State three principles of sustainable development in relation to environmental sustainability.

Question: For each of the situations below:- (a) Mention most relevant clause of ISO 27001:2005 (b) Whether the practice followed in the organization is appropriate and i

Question: (i). Describe the term ‘ecosystem' (ii). What are the major ecosystems in the tropical marine environment. (iii). State and describe four main ecological/eco

Explain how budget planning is related risk management

Q. What is Avoidance of Risk? A business firm can avoid risk by not accepting any assignment or any transaction which involves any type of risk whatsoever. This will naturally


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