Question

The expression 1.08s + 1.02b1.08s+1.02b predicts the end-of-year value of a financial portfolio where ss is the value of stocks and bb is the value of bonds in the portfolio at the beginning of the year. What is the predicted end-of-year value of a portfolio that begins the year with \$200$200 in stocks and \$100$100 in bonds?

Answer 1

The predicted end-of-year value is $318.

Explanation:

We are given the expression for the end-of-year value of the financial portfolio as,

`y=1.08s+1.02b`, where s = value of the stocks and b = value of the bonds.

it is required to find the end-of-year value of a portfolio when,

value of the stocks, s = $200

value of the bonds, b = $100

So, substituting the values in the given expression, we get,

`y=1.08s+1.02b` →
`y=1.08* 200+1.02* 100` →
`y=216+102` → y= 318

Thus, the predicted end-of-year value is $318.