QUESTION 1. You are a recent graduate that has been hired at Price Family Paper as their new Assistant to the Regional Manager. You realize how important saving money for retirement is, so you enroll in the company sponsored retirement plan on Day 1. They offer employees two options for their investments:

Portfolio A: 50% stocks, 20% bonds, 20% mutual funds, 5% t-bills, 5% cash

Portfolio B: 80% stocks, 15% mutual funds, 5% bonds

Which portfolio is better for you to invest in and why? Would this change over time or remain consistent?

QUESTION 2.

Based on the efficient frontier graph, which of the following portfolios is the only portfolio that could exist for investors?

a. 4% risk, 8% return

b. 7% risk, 10% return

c. 17% risk, 26% return

d. 24% risk, 40% return

e. Any of the above portfolios may be valid for investors