Use the table below to answer the following question(s).
Below is a spreadsheet for a situation in which a day trader wants to decide on investing $200 in one of the index funds. Answer the following questions using PHStat.
-What is the expected return (in $)of the given two-asset portfolio?
A)1.90
B)1.62
C)2.39
D)1.33

Question

Use the table below to answer the following question(s).
Below is a spreadsheet for a situation in which a day trader wants to decide on investing $200 in one of the index funds.  Answer the following questions using PHStat.
-What is the expected return (in $)of the given two-asset portfolio?
A)1.90 
B)1.62 
C)2.39 
D)1.33

Quizplus · Accepted Answer

The expected return of Asset 1 (stock market) is 10% and the expected return of Asset 2 (bond market) is 6%. The weights for the two assets are 0.6 and 0.4, respectively. Therefore, the expected return of the two-asset portfolio is (0.6 x 10%) + (0.4 x 6%) = 6% + 2.4% = 8.4%. Multiplying 8.4% by the investment amount of $200 gives an expected return of $16.80.

Based on the expected return, Asset 1 (stock market) would be the best choice. However, it's important to consider other factors such as risk and diversification before making an investment decision.

Use the Table Below to Answer the Following Question(s)