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nthdentre howhefund with the hieh 0.7 Up 20% Buy Stock Fund 0.3 10% 0.5 Up 15% Buy Index Fund 0.5 0.3 Up 7% Buy Bond Fund 0.7 3% O a. the Stock Fund o b. the Index Fund. O c. the Bond Fund. O d.insufficient information to solve the problenm
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Answer #1

Expected return = [R1*P1]+[R2*P2]

Fund
stock fund

[20*.70]+[-10*.30]

14+(-3)

 11%
Index fund

[15*.50]+[-5*.50]

7.5-2.5

 5%
Bond fund

[7*.30]+[3*.7]

2.1+2.1

 4.2%

correct option is "A" stock fund results in highest expected return

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