You determine that the appropriate balance for your investment-risk tolerance is a 76-20-4 proportion (stocks, bonds,...

You determine that the appropriate balance for your investment-risk tolerance is a 76-20-4 proportion (stocks, bonds, and cash). After the first year, your $42,000 investment has doubled in value to $84,000, with $67,200 in stocks, $14,000 in bonds, and $2,800 in cash. How should your assets be allocated to retain your risk proportions?

Expert Solution

Particulars	Weight	× portfolio	Allocation
Stock	76%	$ 84,000	$ 63,840
Bond	20%	$ 84,000	$ 16,800
Cash	4%	$ 84,000	$ 3,360

Revised allocation is above.

Particulars	Required allocation	Existing balance	Action
Stock	$ 63,840	67200	$ 3,360	Sell
Bond	$ 16,800	14000	$ 2,800	Buy
Cash	$ 3,360	2800	$ 560	Keep from stock sale

jeff jeffy answered 1 year ago

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