Penny Francis inherited a​ $200,000 portfolio of investments from her grandparents when she turned 21 years of age. The portfolio is comprised of Treasury bills and stock in Ford​ (F) and Harley...

Penny Francis inherited a​ $200,000 portfolio of investments from her grandparents when she turned 21 years of age. The portfolio is comprised of Treasury bills and stock in Ford​ (F) and Harley Davidson​ (HOG):

a. Based on the current portfolio composition and the expected rates of​ return, what is the expected rate of return for​ Penny's portfolio?

b. If Penny wants to increase her expected portfolio rate of​ return, she can increase the allocated weight of the portfolio she has invested in stock​ (Ford and Harley​Davidson) and decrease her holdings of Treasury bills. If Penny moves all her money out of Treasury bills and splits it evenly between the two​ stocks, what will be her expected rate of​ return?

c. If Penny does move money out of Treasury bills and into the two​ stocks, she will reap a higher expected portfolio​ return, so why would anyone want to hold Treasury bills in their​ portfolio?