Final answer:
The portfolios' levels of risk from lowest to highest are Portfolio 3 (lowest risk, with Treasury bond and Certificate of deposit), Portfolio 1 (medium risk, with Stock in a large, old corporation and a junk bond), and Portfolio 2 (highest risk, with Stock in an emerging company).
Step-by-step explanation:
To determine the portfolios' levels of risk from lowest to highest, we must consider the average returns and inherent risks associated with each type of investment: savings accounts typically have very low risk and low returns; bonds offer higher returns with higher risks; and stocks, particularly in a large, old corporation, or emerging companies, present the highest risk due to significant fluctuations but also the potential for high returns. Treasury bonds are seen as low-risk, government-backed investments with a steady return, while 'junk' bonds have higher risks due to the higher likelihood of default. Certificates of deposit (CDs) have a very low risk because they are typically insured and have a fixed return rate.
With this in mind, the order of the portfolios from lowest to highest risk could be determined as follows:
- Portfolio 3 (Treasury bond and Certificate of deposit) - Lowest risk
- Portfolio 1 (Stock in a large, old corporation and a junk bond) - Medium risk
- Portfolio 2 (Stock in an emerging company) - Highest risk
Therefore, considering the levels of risk involved in each asset category, the correct order from lowest to highest risk is: Portfolio 3, 1, 2.