What is her expected gross return


Question: An individual investor invests one million dollars in stock mutual funds and one million dollars in bond mutual funds. She expects to earn a 2% alpha on her stocks, but no alpha on her bonds. The bonds are expected to earn 5% (taxed as ordinary income), while the stocks are expected to earn a 9% plus alpha (taxed as capital gains). What is her expected gross return (in percent) before fees and taxes?

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Finance Basics: What is her expected gross return
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