Question 35 • Mathematics for Data and Financial Literacy
Zara's portfolio: Portfolio composition: 50% in stocks, 30% in bonds, 20% in real estate Investor goal: Zara is a balanced-risk investor aiming for a 5% return on her investments. Expected returns: Stocks: 6% Bonds: 3% Real estate: 4% What is the expected rate of return for Zara's portfolio, and does it meet her goal of 5% ?
Answer
A
3 point 9 percent; no, it does not meet her goal.
B
1 point 7 percent; yes, it meets her goal.
C
5 point 2 percent; yes, it meets her goal.
D
4 point 7 percent; no, it does not meet her goal.
Explanation
Calculate the weighted return by multiplying each asset’s share by its expected return: 50% × 6% = 3%, 30% × 3% = 0.9%, and 20% × 4% = 0.8%. Adding these gives 4.7%. Since 4.7% is below Zara’s 5% goal, choice D is correct: 4.7%; no, it does not meet her goal.
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