Yang Bai is investing $10,000 and wants a portfolio that is 80% stocks and 20% bonds. She has decided to accomplish this using just two ETFs: a stock ETF trading for $50 a share and a bond ETF trading for $100 a share. What should she do to meet her asset allocation goal?

Question

Quizplus · Accepted Answer

The total value of the portfolio should be $10,000. 80% of $10,000 is $8,000, which should be invested in stocks. 20% of $10,000 is $2,000, which should be invested in bonds. To invest $8,000 in stocks, Yang should purchase 160 shares of the stock ETF (8,000 / 50 = 160). To invest $2,000 in bonds, she should purchase 20 shares of the bond ETF (2,000 / 100 = 20).

Yang Bai Is Investing $10,000 and Wants a Portfolio That