![hernandezana360](/avatars/11974.jpg)
hernandezana360
13.01.2022 •
Business
Suppose Becky is choosing how to allocate her portfolio between two asset classes: risk-free government bonds and a risky group of diversified stocks. The following table shows the risk and return associated with different combinations of stocks and bonds.
Combination Fraction of Portfolio in Average Annual Return Standard Deviation
Diversified Stocks(Percent) (Percent) of Portfolio Return
(Risk)(Percent)
A 0 1.50 0
B 25 3.50 5
C 50 5.50 10
D 75 7.50 15
E 100 9.50 20
As the risk of Becky's portfolio increases, the average annual return on her portfolio __ ( rises, falls) .
Suppose Becky currently allocates 25% of her portfolio to a diversified group of stocks and 75% of her portfolio to risk-free bonds; that is, she chooses combination B. She wants to increase the average annual return on her portfolio from 3.5% to 7.5%. In order to do so, she must do which of the following?
a) Sell some of her stocks and use the proceeds to purchase bonds
b) Sell some of her bonds and use the proceeds to purchase stocks
c) Accept more risk
d) Sell some of her stocks and place the proceeds in a savings account
Solved
Show answers
More tips
- L Leisure and Entertainment How to Make a Paper Boat in Simple Steps...
- T Travel and tourism Maldives Adventures: What is the Best Season to Visit the Luxurious Beaches?...
- H Health and Medicine Kinesiology: What is it and How Does it Work?...
- O Other How to Choose the Best Answer to Your Question on The Grand Question ?...
- L Leisure and Entertainment History of International Women s Day: When Did the Celebration of March 8th Begin?...
- S Style and Beauty Intimate Haircut: The Reasons, Popularity, and Risks...
- A Art and Culture When Will Eurovision 2011 Take Place?...
- S Style and Beauty How to Choose the Perfect Hair Straightener?...
- F Family and Home Why Having Pets at Home is Good for Your Health...
- H Health and Medicine How to perform artificial respiration?...
Answers on questions: Business
- M Mathematics NEED HELP NOW Which is the equation of a hyperbola with directrices at y = ±2 and foci at (0, 4) and (0, −4)? A.) x squared over 8 minus y squared over 16 equals 1...
- M Mathematics What is the equation written in slope-intercept form that passes through the point (3, -3) and is parallel to the line y + 2 = 2(x – 3)?...
Ответ: