Question

Portfolio expected rate of return) Barry Swinter is 60 years of age and considering retirement Barry's retirement portion curreny www and an emerging market fund as follows: 4. Based on the current portfolio composition and the expected rates of return given above, what is the expected rate of return for Barry's portfolio? b. Barry is considering a reallocation of his investments to include more Treasury bills and less exposure to emerging markets. If Barry moves all of his money from the emerging market fund and put it in Treasury bills, what will be the expected rate of return on the resulting portfolio? a. Based on the current portfolio composition and the give Tpcimal places.) Data Table Expected Return 3.1% Treasury bills S&P 500 Index Fund Emerging Market Fund $ Value 85,000 488,000 177,000 11.3% Print Done

Answer 1

a. Expected rate of return = 8.61%

		Weights	Expected return	(a*b)
	Value	(a) [Value/ 750000]	(b)
Treasury bills	85000	0.113	3.10%	0.35%
S&P 500 Index fund	488000	0.651	8.60%	5.60%
Emerging mutual fund	177000	0.236	11.30%	2.67%
	750000			8.61%

b. Expected return if the portfolio comprises of Treasury bills only = 3.1%