Consider the following two part question:
a. Assume that you have looked at market data and determined that for the risk you are willing to accept, an acceptable bond portfolio can provide a yield to maturity of around 6.2%. Also, because you also have an objective of some investment growth for your future retirement, you have determined that an appropriate stock investment currently exhibits a Price Earnings ratio of 12.5. If you have $75,000 to invest how much might you invest in the stocks and how much in the bonds if you use a logical, and rational decision-making approach and not just a subjective “put some here and put some there” approach. Show your work please and clearly state the amount of your dollar investment in each.
b. What would you consider to be important reasons to rebalance your portfolio at some future date?