Question

create a diversified portfolio using the information in the table. as you do so, keep these points in mind:

• it may be helpful to research any unfamiliar investments to determine their type.
• for the pretax expected return, you are computing a simplified estimate because the description of expected gains is an approximation and not an exact prediction.
• when computing the pretax expected return for your bond choice, you may find it helpful to refer to the compound interest formula.
• compute the pretax expected returns based on the time frames provided in the description.

type of investment
name of investment
cost to purchase
pretax expected return
...
table entries (partial):

1. us treasury bond: $8,120.00, 2.75% annual interest for a 30 - year term on a $800 purchase, compounded annually
2. rowe price international bond: $107.95, 3.97% annual interest for a 10 - year term on a $100 purchase, compounded annually
3. adidas ag shares: $122.11, 1 year expected growth of 2.64% on an initial purchase of $115.11
4. vanguard developed markets index fund admiral shares: $10,250.00, 1 year expected growth of 15.95% on an initial purchase of $10,000
5. twenty - first century fox inc. shares: $607.50, expected growth of 12.90% over 3 years on an initial purchase of $800
6. alibaba group holdings ltd shares: $3,100.00, 15% expected return for a 10 - year period on an initial purchase of $2,583
7. fidelity blue chip growth fund: $10,015.00, 5% expected growth for a 1 - year period on an initial purchase of $10,000
8. the investment company of america shares: $42.72, 10 year expected return of 7.92% on an initial purchase of $35
9. vanguard small - cap index fund admiral shares: $10,660.00, 1 year expected growth of 14.13% on an initial purchase of $10,000

...

Explanation:

To solve the problem of computing the pretax expected returns for different investments, we use the compound interest formula for growth or the simple interest - like approach for bonds (depending on the investment type). The compound interest formula is $A = P(1 + r)^t$, where $A$ is the final amount, $P$ is the principal (initial cost to purchase), $r$ is the annual interest rate (or growth rate) as a decimal, and $t$ is the time in years. The pretax expected return is $A - P$.

US Treasury Bond

Step 1: Identify the values

For the US Treasury Bond, $P=\$6,120.00$, the annual interest rate $r = 2.75\%=0.0275$, and the time $t = 30$ years (since it's a 30 - year term with annual compounding).

Step 2: Apply the compound interest formula

We use the formula $A=P(1 + r)^t$. Substitute $P = 6120$, $r=0.0275$ and $t = 30$ into the formula:
\[A=6120\times(1 + 0.0275)^{30}\]
First, calculate $(1 + 0.0275)^{30}$. Using[SSE Completed, Client Connection Error][LLM SSE On Failure]

Answer:

To solve the problem of computing the pretax expected returns for different investments, we use the compound interest formula for growth or the simple interest - like approach for bonds (depending on the investment type). The compound interest formula is $A = P(1 + r)^t$, where $A$ is the final amount, $P$ is the principal (initial cost to purchase), $r$ is the annual interest rate (or growth rate) as a decimal, and $t$ is the time in years. The pretax expected return is $A - P$.

US Treasury Bond

Step 1: Identify the values

For the US Treasury Bond, $P=\$6,120.00$, the annual interest rate $r = 2.75\%=0.0275$, and the time $t = 30$ years (since it's a 30 - year term with annual compounding).

Step 2: Apply the compound interest formula

We use the formula $A=P(1 + r)^t$. Substitute $P = 6120$, $r=0.0275$ and $t = 30$ into the formula:
\[A=6120\times(1 + 0.0275)^{30}\]
First, calculate $(1 + 0.0275)^{30}$. Using[SSE Completed, Client Connection Error][LLM SSE On Failure]