A portfolio consists of assets with the following expected returns

A portfolio consists of assets with the following expected returns

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A portfolio consists of assets with the following expected returns: Expected return Weight in portfolio Real Estate 16% 20% Low-Quality bonds 15% 10% 12% 30% Savings account 5% 40% a) What is the expected return on the portfolio? .16 x .20 + .15 x .10 + .12 x .30 + .05 x .40 = .032 + .015 + .036 + .02 = 10.3%
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Unformatted text preview: b) What will be the expected return if the individual reduces the holdings of the AT&T stock to 15% and puts the funds into real estate investments? .16 x .35 + .15 x .10 + .12 x .15 + .05 x .40 = .056 + .015 + .018 + .020 = 10.9%...
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