On the basis of how long she has until retirement and her comfort with investment risk, Chelsea has decided that she wants toallocate the money in her retirement account as follows: 75% to equities, 20% to fixed income, and 5% to cash. If Chelseaassumes that each asset class earns the low end of the historical average rates of return provided below, what overall rate ofreturn would she expect to earn over the long term?Equities: 8%-12%Fixed Income: 4% - 7%. Cash: 2% - 5%.O 6.90%O 5.60%O 10.65%O 7.75%4.67%

Equity return=r1=8%Fixed income=r2=4%Cash=r3 =2%Equity weight=w1=75%Fixed income weight=w2=4%Cash…

ement and her comfort with investm allocate the money in her retirement account as follows: 75% to equities, 20% assumes that each asset class earns the low end of the historical average rates return would she expect to earn over the long term? ● . . Equities: 8% -12% Fixed Income: 4% - 7% Cash: 2% - 5% O 6.90% O 5.60% O 10.65%

ement and her comfort with investm allocate the money in her retirement account as follows: 75% to equities, 20% assumes that each asset class earns the low end of the historical average rates return would she expect to earn over the long term? ● . . Equities: 8% -12% Fixed Income: 4% - 7% Cash: 2% - 5% O 6.90% O 5.60% O 10.65%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 43P

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