Blair & Rosen, Inc. (B&R) is a brokerage firm that specializes in investment portfolios designed to meet the specific risk tolerances of its clients. A client who contacted B&R this past week has a maximum of $50,000 to invest. B&R's investment advisor decides to recommend a portfolio consisting of two investment funds: an Internet fund and a Blue Chip fund. The Internet fund has a projected annual return of 18%, while the Blue Chip fund has a projected annual return of 8%. The investment advisor requires that at most $25,000 of the client's funds should be invested in the Internet fund. B&R services include a risk rating for each investment alternative. The Internet fund, which is the more risky of the two investment alternatives, has a risk rating of 5 per thousand dollars invested. The Blue Chip fund has a risk rating of 5 per thousand dollars invested. For example, if $10,000 is invested in each of the two investment funds, B&R's risk rating for the portfolio would be 5(10) + 5(10) = 100. Finally, B&R developed a questionnaire to measure each client's risk tolerance. Based on the responses, each client is classified as a conservative, moderate, or aggressive investor. Suppose that the questionnaire results classified the current client as a moderate investor. B&R recommends that a client who is a moderate investor limit his or her portfolio to a maximum risk rating of 230.
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Answer :
a)
Particulars | Amount | Annual return |
Propotion (Max/Min) |
% of total | Risk rating Risk | Risk |
Investment | $50,000 | |||||
Internet fund | 18% | 20,000 | 50% | 5 | 115 | |
Blue chip fund | 8% | 30,000 | 50% | 5 | 115 |
Therefore :
Internet fund = Porpotion * Annual return
= $ 20,000 * 18%
= $ 20,000 * 0.18
= 3,600
Internet fund = 3,600
Blue chip fund = 30,000 * 8%
= 30,000 * 0.08
= 2400
Blue chip fund = 2400
Annual return =Internet fund + Blue chip fund
=3600 + 2400
= 6,000
Annual return = 6,600
d)
Particulars | Amount | Annual return |
Propotion (Max/Min) |
% of total | Risk rating Risk | Risk |
Investment | $50,000 | |||||
Internet fund | 18% | 0 | 0% | 5 | 0 | |
Blue chip fund | 8% | 40,000 | 100% | 5 | 150 |
Therefore :
Internet fund = Porpotion * Annual return
= $ 0 * 18%
= 0
Internet fund = 0
Blue chip fund = 40,000 * 8%
= 40,000 * 0.08
= 3200
Blue chip fund = 3000
Annual return =Internet fund + Blue chip fund
=0 + 3200
= 3,200
Annual return = 3,200
Note : As HOMEWORKLIB RULES rule,we answered only 2 questions,i have a little bit doubt in questions b,c so I had answered questions a,d.Thank you.
Blair & Rosen, Inc. (B&R) is a brokerage firm that specializes in investment portfolios d...
Blair & Rosen, Inc. (B&R) is a brokerage firm that specializes in investment portfolios designed to meet the specific risk tolerances of its clients. A client who contacted B&R this past week has a maximum of $50,000 to invest. B&R's investment advisor decides to recommend a portfolio consisting of two investment funds: an Internet fund and a Blue Chip fund. The Internet fund has a projected annual return of 12%, while the Blue Chip fund has a projected annual return...
Blair & Rosen, Inc. (B&R) is a brokerage firm that specializes in investment portfolios designed to meet the specific risk tolerances of its clients. A client who contacted B&R this past week has a maximum of $50,000 to invest. B&R's investment advisor decides to recommend a portfolio consisting of two investment funds: an Internet fund and a Blue Chip fund. The Internet fund has a projected annual return of 12%, while the Blue Chip fund has a projected annual return...
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Blair & Rosen, Inc. (B&R) is a brokerage firm that specializes in investment portfolios designed to meet the specific risk tolerances of its clients. A client who contacted B&R this past week has a maximum of $55,000 to invest. B&R's investment advisor decides to recommend a portfolio consisting of two investment funds: an Internet fund and a Blue Chip fund. The Internet fund has a projected annual return of 11%, while the Blue Chip fund has a projected annual return...
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