A recent advertisement on ABCNews promoted investing retirement savings using a balanced mutual fund. The advertiser's balanced
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Question:
A recent advertisement on ABCNews promoted investing retirement savings using a "balanced" mutual fund. The advertiser's balanced fund is 50 percent stocks and 50 percent investment grade corporate bonds.
Expected Annual Return (stock) 11% Expected Annual Return (Bonds) 6%
Standard Deviation of Annual (stock) 20% Standard Deviation of Annual (Bonds) 8%
The historic correlation between the returns of well-diversified stock and investment grade corporate bond portfolios of 0.15 is expected to continue.
If you put $3,000 into this portfolio for 30 years starting today, how can I calculate the expected value of the portfolio at the end of the 30th year?
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