You have decided to invest $70,000 in Stock Fund, and $30,000 in Bond. The retur

Question

You have decided to invest $70,000 in Stock Fund, and $30,000 in Bond. The returns for each fund are forecasted below: Fill in the portfolio’s forecasted return for a strong economy and a weak economy. Then calculate the expected return for the portfolio.

Economy (Probalility)   Stock Fund Return    Bond Fund Return Portfolio Return

Strong (65%)                        16%                                          2%                    ____

Weak   (35%)                          -12%                                       7%                     ___

Expected return portfolio___________

Explanation / Answer

Statement showing computations Particulars Amount Weight Strong Economy Weak Economy Stock Fund               70,000.00                      0.70 16%*.7 + 2%*.30 = 11.80% -12%*0.7 + 7%*0.3 = 6.3% Bond               30,000.00                      0.30            100,000.00                      1.00 Expected Return on Portfolio = .65*11.80% + .35*6.3% Expected Return on Portfolio = 9.88%

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.