Question
You are a new Carson College graduate and your employer will contribute $5,000 per year to your 401(k) plan. Your 401(k) plan permits three types
You are a new Carson College graduate and your employer will contribute $5,000 per year to your 401(k) plan. Your 401(k) plan permits three types of investments: government bond fund, corporate bond fund, and a stock market fund. The return on the government bond fund is typically 4-6% with an average of 5%. The return on the corporate bond fund is typically 6-10% with an average of 8%. The return on the stock market fund is 5-15% with an average of 10%.
a. How will you allocate your investments between the three investment options?
b. Why did you select the allocation you did?
c. What is the minimum return you expect from your allocation?
d. What is the maximum return you expect from your allocation?
e. What is the expected average return you expect from your allocation?
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