Question

Use the following table of returns from 1926 through 2017: Average return 12.1% 16.5 Series Large stocks Small stocks Long-term corporate bonds Long-term government bonds U.S. Treasury bills Inflation 6.4 6.0 3.4 3.0 a. Determine the return on a portfolio that was equally invested in large-company stocks and long-term corporate bonds. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What was the return on a portfolio that was equally invested in small stocks and Treasury bills? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Portfolio Return b. Portfolio Return

Answer 1

Portfolio Ret is weighted Avg ret of securities in that portfolio.

Part A:

Security	Weight	Ret	Wtd Ret
Large Company Stock	0.5	12.10%	0.0605
Long term Corporate Bond	0.5	6.40%	0.032
Portfolio Ret			0.0925

Portfolio ret is 9.25%

Part B:

Security	Weight	Ret	Wtd Ret
Small Stock	0.5	16.50%	0.0825
Treasury Bills	0.5	3.40%	0.017
Portfolio Ret			0.0995

Portfolio ret is 9.95%