In the course of researching the benefits of diversification, you collect the information given in the table on page 47 (top), which presents rates of return for different portfolios.

(a) Use a line chart to plot the 20-year return for all five portfolios.

(b) What information do these plots provide?

Table on page 47

Transcribed Image Text:

Year 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 Compound annual return Stocksa 4.01% 14.31 18.98 - 14.66 -26.47 37.20 23.84 -7.18 6.56 18.44 32.42 -4.91 21.41 22.51 6.27 32.16 18.47 5.23 16.81 31.49 11.55 Bondsb 12.10% 13.23 5.68 -1.11 4.35 9.19 16.75 -.67 -1.16 -1.22 -3.95 1.85 40.35 .68 15.43 30.97 24.44 -2.69 9.67 18.11 9.00 60% stocks 40 % bonds 7.52% 14.14 13.54 -9.11 -14.88 25.65 21.18 -4.57 3.65 10.28 17.45 - 1.99 28.98 13.43 10.11 31.85 21.11 3.59 13.97 26.24 10.89 stocks bonds cash 7.98 % 10.83 9.38 -3.03 -5.44 17.04 15.19 -0.94 4.40 9.14 13.17 4.06 23.97 10.52 10.75 23.38 16.61 3.92 11.01 19.22 9.78 BB&K Index 4.7 % 13.7 15.1 -2.2 -6.6 19.6 11.5 6.1 13.0 11.5 17.9 6.4 14.4 15.4 10.4 25.4 23.3 8.6 13.2 14.3 11.54