Portfolio returns composition
Not what you're looking for?
1. (Related to Checkpoint 8.1) (Portfolio expected rate of return) Penny Francis inherited a $100,000 portfolio of investments from her grandparents when she turned 21 years of age. The portfolio is comprised of the following three investments:
Expected Return and Value
Treasury Bills 4.8% 50,000
Ford (F) 6.4% 40,000
Harley Davidson (HOG) 12.2% 10,000
a. Based on the current portfolio composition and the expected rates of return, what is the expected rate of return for Penny's portfolio?
b. If Penny wants to increase her expected portfolio rate of return, she could increase the allocated weight of the portfolio she has invested in stock (Ford and Harley Davidson) and decrease her holdings of Treasury bills. If Penny moves all her money out of Treasury bills and splits it evenly between the two stocks, what will be her expected rate of return?
c. If Penny does move money out of Treasury bills and into the two stocks she will reap a higher expected portfolio return, so why would anyone want to hold Treasury bills in their portfolio?
Purchase this Solution
Solution Summary
The current portfolio composition and the expected rates of returns are determined. The expected rate of return for Penny's portfolio are given.
Education
- MPhil, Madurai Kamaraj University
- MCom, Annamalai University
- IATA, International Air Transport Association
Recent Feedback
- "Great explanations on how the answers were obtained."
- "Love the way she explains everything step by step."
- "Solutions were thoroughly explained."
- "Excellent explanations of how problems are solved"
- "Thanks"
Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.