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Suppose Beth is choosing how to allocate her portfolio between two asset classes: risk - free government bonds and a risky group of diversified stocks.The
Suppose Beth is choosing how to allocate her portfolio between two asset classes: riskfree government bonds and a risky group of diversified stocks.The following table shows the risk and return associated with different combinations of stocks and bondsIf Beth reduces her portfolios exposure to risk by opting for a smaller share of stocks, she also must accept a higherlower annual return. Suppose Beth currently allocates of her portfolio to a diversitied group of stocks and of her portfolio to risk free bonds; that is she choose combination B She wants to increase the average annual retum on her portfolio from to In order to do so she must do which of the following? Check all that apply:Accoot moro rick Sell some of her stocks and use the proceeds to purchase bonds Sell some of her stocks and place the proceeds in a savings account Sell some of her bonds and use the proceeds to purchase stocks Accept more riskThe table uses the standard deviation of the portfolio's return as a measure of risk. A normal random variable, such as a portfolio's return, stays within two standard deviations of its average approximately of the time.Suppose Beth modifies her portiolio to contain of diversified stocks and risk free government bonds; that is she chooses combination C The average annual retum for this type of portiolo is but given the standard deviation of the returns will typically about of the time vary from a gain of to a loss of
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