CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

In January 2011, a private investor decided to allocate $2,000 to a gas and electric utilities mutual fund, $5,000 to a small company mutual fund, and $3,000 to a technology stock mutual fund. In 2011, the utilities fund had a return rate of 4.3%, the small company mutual fund had a return rate of 1.4%, and the technology stock mutual fund had a return rate of 8.5%. Find the average rate of return on thses investments.
A. 4.11%
B. 4.73%
C. 14.2%
Explanation: The average return is the weighted average.

User Contributed Comments 3

User Comment
mc25456 0.2*4.3%+0.5*1.4%+0.3*8.5%
CWade10 why wouldn't you use geometric mean of returns?
ConnerVP1 The average would be (4.3+1.4+8.5)/3 = 4.73%

The weighted average, and also the portfolio return, is as shown by mc2546 above. Question is somewhat misleading...
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