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average annual return. If Dina reduces her portfolio's exposure to risk by opting for a smaller share of stocks, she must also accept a Suppose Dina 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 5.5% to 10.5%. In order to do so, she must do which of the following? Check all that apply. Accept more risk Sell some of her stocks and use the proceeds to purchase bonds Sell some of her bonds and use the proceeds to purchase stocks Sell some of her stocks and place the proceeds in a savings account

average annual return. If Dina reduces her portfolio's exposure to risk by opting for a smaller share of stocks, she must also accept a Suppose Dina 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 5.5% to 10.5%. In order to do so, she must do which of the following? Check all that apply. Accept more risk Sell some of her stocks and use the proceeds to purchase bonds Sell some of her bonds and use the proceeds to purchase stocks Sell some of her stocks and place the proceeds in a savings account

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Suppose Dina 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 A B с D E Fraction of Portfolio in Diversified Stocks (Percent) ០ 25 50 75 100 Average Annual Return (Percent) 3.00 5.50 8.00 10.50 13.00 Standard Deviation of Portfolio Return (Risk) (Percent) 0 5 10 15 20
Transcribed Image Text:Suppose Dina 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 A B с D E Fraction of Portfolio in Diversified Stocks (Percent) ០ 25 50 75 100 Average Annual Return (Percent) 3.00 5.50 8.00 10.50 13.00 Standard Deviation of Portfolio Return (Risk) (Percent) 0 5 10 15 20
If Dina reduces her portfolio's exposure to risk by opting for a smaller share of stocks, she must also accept a Suppose Dina 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 5.5% to 10.5%. In order to do so, she must do which of the following? Check all that apply. 00 Accept more risk Sell some of her stocks and use the proceeds to purchase bonds average annual return. Sell some of her bonds and use the proceeds to purchase stocks Sell some of her stocks and place the proceeds in a savings account
Transcribed Image Text:If Dina reduces her portfolio's exposure to risk by opting for a smaller share of stocks, she must also accept a Suppose Dina 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 5.5% to 10.5%. In order to do so, she must do which of the following? Check all that apply. 00 Accept more risk Sell some of her stocks and use the proceeds to purchase bonds average annual return. Sell some of her bonds and use the proceeds to purchase stocks Sell some of her stocks and place the proceeds in a savings account
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