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\begin{tabular}{|l|l|l|l|}
\hline \multicolumn{1}{|c|}{ Investment } & Portfolio 1 & Portfolio 2 & Portfolio 3 \\
\hline Stock in Large, Old Corporation & [tex]$\$[/tex] 500[tex]$ & $[/tex]\[tex]$ 2,000$[/tex] & [tex]$\$[/tex] 2,000[tex]$ \\
\hline Stock in Emerging Company & $[/tex]\[tex]$ 5,000$[/tex] & [tex]$\$[/tex] 500[tex]$ & $[/tex]\[tex]$ 1,000$[/tex] \\
\hline U.S. Treasury Bond & [tex]$\$[/tex] 3,000[tex]$ & $[/tex]\[tex]$ 500$[/tex] & [tex]$\$[/tex] 1,000[tex]$ \\
\hline Certificate of Deposit & $[/tex]\[tex]$ 500$[/tex] & [tex]$\$[/tex] 6,000[tex]$ & $[/tex]\[tex]$ 3,000$[/tex] \\
\hline
\end{tabular}

Which of the following shows the portfolios' levels of risk from highest to lowest?

A. Portfolio 2, Portfolio 3, Portfolio 1
B. Portfolio 1, Portfolio 3, Portfolio 2
C. Portfolio 2, Portfolio 1, Portfolio 3
D. Portfolio 3, Portfolio 2, Portfolio 1



Answer :

GinnyAnswer
To determine the portfolios' levels of risk from highest to lowest, we need to analyze the contributions of different types of investments within each portfolio. In the given problem, the higher the amount in stocks (both in large corporations and emerging companies), the higher the level of risk.

Let's break down the calculations step by step for each portfolio to find out their levels of risk:

### Portfolio 1:
- Stock in Large, Old Corporation: \[tex]$500 - Stock in Emerging Company: \$[/tex]5000

Total risk from stocks in Portfolio 1:
[tex]\[500 + 5000 = 5500\][/tex]

### Portfolio 2:
- Stock in Large, Old Corporation: \[tex]$2000 - Stock in Emerging Company: \$[/tex]500

Total risk from stocks in Portfolio 2:
[tex]\[2000 + 500 = 2500\][/tex]

### Portfolio 3:
- Stock in Large, Old Corporation: \[tex]$2000 - Stock in Emerging Company: \$[/tex]1000

Total risk from stocks in Portfolio 3:
[tex]\[2000 + 1000 = 3000\][/tex]

### Comparing Risk Levels:
Now let's compare the total risk values calculated for each portfolio:
- Portfolio 1: 5500
- Portfolio 2: 2500
- Portfolio 3: 3000

From the calculations, we can see that the order of portfolio risk levels from highest to lowest is:

[tex]\[ \text{Portfolio 1} > \text{Portfolio 3} > \text{Portfolio 2} \][/tex]

Therefore, the correct answer is:

Portfolio 1, Portfolio 3, Portfolio 2

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