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Question: ANSWER CHOICES 1ST BLUE LINE:RISES/FALLS. 2ND BLUE LINE:-15%, 1%,15%,25%. 3RD BLUE LINE: -15%, -...

Question: ANSWER CHOICES 1ST BLUE LINE:RISES/FALLS. 2ND BLUE LINE:-15%, 1%,15%,25%. 3RD BLUE LINE: -15%, -...

ANSWER CHOICES 1ST BLUE LINE:RISES/FALLS. 2ND BLUE LINE:
-15%, 1%,15%,25%. 3RD BLUE LINE: -15%, -5%, 1%, 25%

Show transcribed image text 8. Risk and return Suppose Susan is choosing how to allocate her portfolio between two asset classes: risk-free government bonds and a risky group of diversified stocks. The following table shows the risk and return associated with different combinations of stocks and bonds. Fraction of Portfolio in Diversified Average Annual Standard Deviation of Portfolio Return Stocks (Risk) Return (Percent) (Percent) (Percent) Combination 1.00 25 3.00 50 5.00 10 7.00 75 15 100 9.00 20 As the risk of Susan's portfolio increases, the average annual retu rn on her portfolio Suppose Susan currently allocates 75% of her portfolio to a diversified group of stocks and 25% of her portfolio to risk-free bonds; that is, she chooses combination D. She wants to reduce the level of risk associated with her portfolio from a standard deviation of 15 to a standard deviation of 5. In order to do so, she must do which of the following? Check all that apply. Place the entirety of her portfolio in bonds Sell some of her bonds and use the proceeds to purchase stocks O Sell some of her stocks and use the proceeds to purchase bonds O Accept a lower average annual rate of return

8. Risk and return Suppose Susan is choosing how to allocate her portfolio between two asset classes: risk-free government bonds and a risky group of diversified stocks. The following table shows the risk and return associated with different combinations of stocks and bonds. Fraction of Portfolio in Diversified Average Annual Standard Deviation of Portfolio Return Stocks (Risk) Return (Percent) (Percent) (Percent) Combination 1.00 25 3.00 50 5.00 10 7.00 75 15 100 9.00 20 As the risk of Susan's portfolio increases, the average annual retu rn on her portfolio Suppose Susan currently allocates 75% of her portfolio to a diversified group of stocks and 25% of her portfolio to risk-free bonds; that is, she chooses combination D. She wants to reduce the level of risk associated with her portfolio from a standard deviation of 15 to a standard deviation of 5. In order to do so, she must do which of the following? Check all that apply. Place the entirety of her portfolio in bonds Sell some of her bonds and use the proceeds to purchase stocks O Sell some of her stocks and use the proceeds to purchase bonds O Accept a lower average annual rate of return