Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Wilson Miller has his first full time job and is considering how to invest his savings. His dad suggested he invest no more than 25% of his savings in the stock of his employer (EMR) so he is considering investing the remaining 75% in a combination of risk-free investments in the US Treasury Bills, currently paying 4% and Starbucks (SBUX) common stock. Wilson father has invested in the stock market for many years and suggested that Wilson might expect to earn 9% in the Emerson shares and 12% from the Starbucks shares. Wilson decides to put 25% in the Emerson shares, 25% in the Starbucks shares and the remaining 50% in Treasury Bills. Given Wilson Portfolio Allocation, what rate of return should he expect to receive on his investment?
The expected rate of return for Wilson’s portfolio, can be calculated as a weighted average of these expected
Question 1a.
Calculate the expected rate of return for Wilson Portfolio, in a tabular format display this information and calculate the portfolio return
Question 1b.
Calculate the expected return for Wilson’s portfolio, where he places a quarter of his money in Treasury Bills, half in Starbucks and the remainder in EMR
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