Your broker has suggested that you diversify your investments by splitting your

Question

Your broker has suggested that you diversify your investments by splitting your portfolio among mutual funds, municipal bond funds, stocks, and precious metals. She suggests three good mutual funds, three municipal bond funds, eight stocks, and three precious metals (gold, silver, and platinum).

(a) Assuming your portfolio is to contain one of each type of investment, how many different portfolios are possible?
choices

(b) Assuming your portfolio is to contain two mutual funds, two municipal bond funds, one stock, and two precious metals, how many different portfolios are possible?
choices

Explanation / Answer

a) Number of difference portfolios possible = 3*3*8*3 = 216

b) Number of difference portfolios possible = 3C2 * 3C2 * 8C1 * 3C2 = 3*3*8*3 = 216

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