Question #2: optimal Risky Portfolio 135 Pointsl You are trying to decide whether to buy...
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Question #2: optimal Risky Portfolio 135 Pointsl You are trying to decide whether to buy Vanguard's Large Stock Equity Fund and/or its Treasury Bond Fund (both are risky assets). You believe that next year involves several possible scenarios to which you have assigned probabilities. You have also estimated the expected returns for each of the two funds for each scenario. Your spreadsheet looks like the following: Next Year's Probability Large Stock Equity Fund Bond Fund Expected Possibilities Expected Rate of Return Rate of Return -0.13 Recession 0.15 0,15 0.05 Weak Economy 0.05 0.03 0.07 0.10 Average Economy 0.60 0.20 0.24 0.09 Strong Economy
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