General Education Development (GED) Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the GED Exam. Test your skills with a dynamic quiz featuring diverse questions and detailed explanations. Sharpen your preparation and excel in your exam!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

If Investor D's portfolio consists of stocks with an 8.8% return and bonds with a 5.2% return, what would be required to calculate the overall portfolio return?

Knowledge of the number of stocks
The total amount invested in stocks and bonds
Current market trends
The duration of the investment

The correct answer is: The total amount invested in stocks and bonds

To determine the overall return of Investor D's portfolio, understanding the total amount invested in stocks and bonds is crucial. This is because the overall return is a weighted average; each type of investment contributes to the return based on its proportion in the total investment. For instance, if more capital is allocated to stocks compared to bonds, the overall portfolio return will be closer to the stock return of 8.8%. Conversely, if the majority of the funds are in bonds, the return will lean towards the bond return of 5.2%. Knowing the total investment amounts allows you to calculate this weighted average accurately. The number of stocks could provide insight into the diversification of the portfolio, but it does not directly affect the calculation of the overall return. Current market trends might influence future returns but are not necessary for calculating the existing portfolio return. Similarly, the duration of the investment relates more to the time factor and compounding rather than the calculation of the return itself.