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2. Portfolio A and Portfolio B had the same holding period return last year. Most of...

2. Portfolio A and Portfolio B had the same holding period return last year. Most of the returns from Portfolio A came from dividends, while most of the returns from Portfolio B came from capital gains. Which portfolio was likely owned by a single working person making a high salary, and which one was likely owned by a retired couple? Why?

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Answer #1

Portfolio A was most likely owned by a retired couple since they are averse to taking risks and would invest in stocks that provide regular income.

Portfolio B was likely owned by a single working person making high salary because the returns come from high growth stocks which provide high capital gains. He has high salary and does not have much responsibilities hence is not averse to taking risks.He can invest in stocks which offer good prospects for capital gains rather than regular dividend.

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