Portfolio Expected Return

The expected rate of return on a portfolio is the weighted average of the expected rates of return on assets comprising the portfolio, The weights, which add up to 1, reflect the fraction of total portfolio invested in each asset. Thus; there are two determinants of portfolio return expected rate of return on each asset and the relative share of each asset in the portfolio. Symbolically, the expected return for a n-asset portfolio is defined by Equation 3.5.


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