Question

1. The following are four possible investments and their anticipated returns:

                      Savings Account                                3 percent

                      Corporate Debt                                    8 percent

                      Corporate Equities                              12 percent

                      Derivatives                                          18 percent

         

          A financial planner suggests that your great Gabriella invest 30 percent in savings accounts, 45 percent in corporate debt, and 25 percent in corporate equities. The same financial planner suggests that you invest 5 percent in savings accounts, 25 percent in corporate debt, 60 percent in corporate equities, and 10 percent in                       derivatives. What are the anticipated returns on both portfolios? What is the standard deviation associated with each portfolios? Why are they different? (5 points)

Answer 1