Calculate the expected return on the portfolio [E ( R )] of the following assets if you invest 20% in asset 1, 30% in asset 2, and 50% in asset 3. How and why will your answer change if you shift 20% of invested funds from the least risky (asset 3) to the most risky (asset 1) asset?
Expected return = allocation in asset 1*return on asset1+allocation in asset 2*return on …
Solution describes the steps for calculating expected portfolio return in the given ratios. It also calculates the expected return if there is a change in ratios.