You want to save for a down payment on a house that costs $300,000 in 5 years.
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Question:
You want to save for a down payment on a house that costs $300,000 in 5 years. You have $100,000 to invest and want to invest it in a portfolio of stocks and bonds. You believe that a portfolio of 60% stocks and 40% bonds will give you the best balance between risk and return. You expect the annual return on stocks to be 10% and the annual return on bonds to be 5%. Assuming that these rates of return remain constant over the 5 years, how much money will you have for your down payment in 5 years?
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