Problem:
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?
Asset Return
1 10%
2 7%
3 6%