Question
John Smith has an equal amount invested in each of the following four securities: Security : K T Z G Expected Annual Rate of Return
John Smith has an equal amount invested in each of the following four securities:
Security : K T Z G
Expected Annual Rate of Return : 0.13 0.23 0.35 0.22
a.John plans to sell security Z and use the proceeds to purchase a new security that has the same expected as the current portfolio. What will happen to the expected return for the investors new portfolio, compared to the current portfolio? Explain.
b.If John intends to sell security K instead, and use the proceeds to purchase a new security that has an expected return of 11%. Compared to the investors initial portfolio, what will be the expected return for the investors revised portfolio? Explain.
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