(Related to Checkpoint B.1) (Computing the portfolio expected rate of return) Penny Francis inherited a $200,000 portfolio of investments from her grandparents when she turned 21 years of age. The portfolio is comprised of Treasury bills and stock in Ford (F) and Harley Davidson (HOG) a. Based on the current portfolio composition and the expected rates of return, what is the expected rate of retum for Penny's portfolio? b. If Penny wants to increase her expected portfolio rate of return, she can 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 spits it evenly between the two stocks, what will be her expected rate of return? c. If Penny does move money out of Treasury bits 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? a. Based on the current portfolio composition and the given expected rates of return, the expected rate of return for Penny's portfolio is % (Round to two decimal places) Data table Expected Return Print Treasury bills Ford (F) Harley Davidson (HOG) (Click on the con in order to copy its contents indo a apreadsheet) 4.4% 6.1% 12.6% s Value 71,000 51,000 78,000 Done
(Related to Checkpoint B.1) (Computing the portfolio expected rate of return) Penny Francis inherited a $200,000 portfolio of investments from her grandparents when she turned 21 years of age. The portfolio is comprised of Treasury bills and stock in Ford (F) and Harley Davidson (HOG) a. Based on the current portfolio composition and the expected rates of return, what is the expected rate of retum for Penny's portfolio? b. If Penny wants to increase her expected portfolio rate of return, she can 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 spits it evenly between the two stocks, what will be her expected rate of return? c. If Penny does move money out of Treasury bits 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? a. Based on the current portfolio composition and the given expected rates of return, the expected rate of return for Penny's portfolio is % (Round to two decimal places) Data table Expected Return Print Treasury bills Ford (F) Harley Davidson (HOG) (Click on the con in order to copy its contents indo a apreadsheet) 4.4% 6.1% 12.6% s Value 71,000 51,000 78,000 Done
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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Transcribed Image Text:(Related to Checkpoint 8.1) (Computing the portfolio expected rate of return) Penny Francis inherited a $200,000 portfolio of investments from her grandparents when she turmed 21 years of age. The
portfolio is comprised of Treasury bills and stock in Ford (F) and Harley Davidson (HOG)
a. Based on the current portfolo composition and the expected rates of return, what is the expected rate of retum for Penny's portfolio?
b. If Penny wants to increase her expected portfolio rate of retur, she can increase the alocated 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 spits 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?
a. Based on the current portfolio composition and the given expected rates of return, the expected rate of return for Penny's portfolios (Round to two decimal places)
Data table
Expected
Return
44%
Print
Treasury bills
Ford (F)
Harley Davidson (HOG)
(Click on the icon in order to copy its contents edo a spreadsheet)
6.1%
12.6%
S Value
71,000
51,000
78,000
Done
X
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