Thus far, we have assumed that each value has equal weight, or importance, but that is not always the case. Suppose a stock is expected to have a return of either 2%, 8%, or 35%. The simple, arithmetic average is

The weighted average of this example is

Check Your UnderstandingSuppose you own some shares of Gordon Enterprise's stock. Gordon's stock has produced these returns over the past four years:

Year	Return
1	7%
2	-4%
3	9%
4	33%

The average measures the average return over the past four years and is while the average of better reflects the change in the stock's value each year.

Your full stock portfolio actually consists of five stocks, and Gordon is only one of its stocks. Each stock's return from last year and its weight in the portfolio is shown below:

Stock Name	Weight in Portfolio	Last Year's Return
Gordon Enterprises	0.25	33%
Benik & Co.	0.10	16%
Liles Industries	0.35	9%
Robison Corp.	0.10	-7%
Suvak Inc.	0.20	12%

The portfolio return for last year is which is average.