Answer: 16.26%
Explanation:
The expected return is the weighted average of the returns of the constituent stocks in the portfolio.
Weights.
Stock A = 20%
Stock B
= 30,000/70,000
= 0.4286
Stock C
= 70,000 - 30,000 - (20% * 70,000)
= 70,000 - 30,000 - 14,000
= $26,000
= 26,000/70,000
= 0.3714
Expected return = ( 0.2 * 12%) + ( 0.4286* 15%) + ( 0.3714 * 20%)
= 0.024 + 0.06429 + 0.07428
= 0.16257
= 16.26%