The return on a portfolio that invests 40% in large-company stocks and 60% in lo

Question

The return on a portfolio that invests 40% in large-company stocks and 60% in long-term government bonds is percent. The return on a portfolio that is equally invested in small-company stocks and Treasury bills is percent. (Do not include the percent signs (%). Round your answers to 2 decimal places, (e.g., 32.16.))

   Investment Average Return   Large-company stocks 13.2%         Small-company stocks 18            Long-term corporate bonds 5.8            Long-term government bonds 5.5            U.S. Treasury bills 3.5            Inflation 4.1         

Explanation / Answer

The return on a portfolio that invests 40% in large-company stocks and 60% in long-term government bonds is

= 13.2% (0.4) + 5.5(0.6) = 5.2% + 3.3% = 8.5%

The return on a portfolio that is equally invested in small-company stocks and Treasury bills is

= 18%(0.5) + 3.5%(0.5) = 9% + 1.75% = 10.75%

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

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