Investment TheoryHomework Answers
Answer to a.
Based on Mean return: Other things remaining the same, fund with the highest Mean return should be chosen. Hence, Fund C shall be chosen based on Mean return.
Based on Volatility: Other things remaining the same, fund with the lowest volatility should be chosen. Hence, Fund B or D shall be chosen. However, between these two, Fund D has higher Mean return and hence Fund D shall be chosen.
Answer to b.
Fund B has the least correlation to the current portfolio, and hence she shall invest in Fund B.
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Investment Theory Consider the following four index funds: 5. Fund A Fund B Fund C Fund...
5. Return and Risk of Portfolio (12%) Mr. Smith's portfolio of $2 million is invested as...
5. Return and Risk of Portfolio (12%) Mr. Smith's portfolio of $2 million is invested as follows: Summary of Smith's Current Portfolio Annual Percentage of Expected Value Standard Total Annual Return Deviation Short-term Bonds 200,000 10% 4.6% 1.6% Domestic Large-Cap 600,000 30% 12.4% 19.5% Equities Domestic Small Cap 1.200.000 60% 16.0% 29.9% Equities Total Portfolio 2,000,000 100% 13.8% 23.1% Smith soon expects to receive an additional $2 million and plans to invest the entire amount in an index fund that...
A) index funds/ money market mutual funds/ sector funds B)esctor funds/index funds/money market mutual funds C)...
A) index funds/ money market mutual funds/ sector funds
B)esctor funds/index funds/money market mutual funds
C) money market mutual funds/index funds/sector funds
6. Mutual funds by risk and return Risk and Return of Money Market Mutual Funds, Sector Funds, and Index Funds The following three fund types differ in general price volatility and potential for return money market mutual funds, sector funds, and index funds Label the graph that follows to show the relative volatility and potential return of these...
Innis Investments manages funds for a number of companies and wealthy clients. The investment strategy is...
Innis Investments manages funds for a number of companies and wealthy clients. The investment strategy is tailored to each client’s needs. For a new client, Innis has been authorized to invest up to $1.2 million in two investment funds: a stock fund and a money market fund. Each unit of the stock fund costs $50 and provides an annual rate of return of 10%; each unit of the money market fund costs $100 and provides an annual rate of return...
John's current portfolio of S500,000 is invested as follows: Expected annual Current Value Annual standard return...
John's current portfolio of S500,000 is invested as follows: Expected annual Current Value Annual standard return $100,000 Bonds 12% S250,000 HSBC shares 8% 12% S150,000 SaSa shares 10% 18% John soon expects to receive a gratuity of S200,000 and plans to invest the entire amount in an index fund that best complements the current portfolio. John is considering the following four index funds. His selection criteria are to maintain or increase the expected return of the current portfolio and maintain...
in i Maximum investment in the internet fund (c) Suppose that a second dient with $50,000...
in i Maximum investment in the internet fund (c) Suppose that a second dient with $50,000 to invest has been dassified as an aggressive investor. B&R recommends that the maximum portfolio risk rating for a aggressive investor is 320. What is the recommended investment portfolio for this aggressive investor? Internet Fund Blue Chip Fund- Annual Return - (d) Suppose that a third dient with $50,000 to invest has been dlassified as a conservative investor. B&R recommends that the maximum portfolio...
Consider the following assets available for investment: 1. A stock index fund 2. A corporate bond...
Consider the following assets available for investment: 1. A stock index fund 2. A corporate bond fund 3. A utility fund 4. A global fund 5. A treasury fund You have research on the funds that has projected out the expected returns (in percent) for the funds along with the probabilities of those returns occurring. The following table shows the expectations: probability CBFUF SIF -18 Rec 15 -5 GF TE -20 3 -10 153 N Rec -7 wwww norm .3...
Joe is reviewing the investment performance of four mutual funds (A, B, C, and D). Based...
Joe is reviewing the investment performance of four mutual funds (A, B, C, and D). Based on a risk-free rate of 3 percent and the systematic risk of each of the portfolios, which one of the funds has the highest systematic risk-adjusted return? (Alternatively, which one has the highest Treynor ratio?) Return Std Deviation Beta Portfolio A 10.0% 19.0% 0.90 Portfolio B 12.0% 40.0% 0.70 Portfolio C 18.0% 30.0% 1.25 Portfolio D 22.0% 25.0% 1.80
Problem 4 (15 marks). Consider the following information about a risky portfolio that you manage, and...
Problem 4 (15 marks). Consider the following information about a risky portfolio that you manage, and a risk-free asset: E(Tp) = 11%, p = 15%, ry = 5%. a) Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on her overall or complete portfolio equal to 8%. What proportion should she invest in the risky portfolio, P, and what proportion in the risk-free asset? (5 marks]...
Blair & Rosen, Inc. (B&R) is a brokerage firm that specializes in investment portfolios designed to...
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...
Problem 7-27 Blair & Rosen, Inc. (B&R) is a brokerage firm that specializes in investment portfol...
Problem 7-27 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...
5. Return and Risk of Portfolio (12%) Mr. Smith's portfolio of $2 million is invested as follows: Summary of Smith's Current Portfolio Annual Percentage of Expected Value Standard Total Annual Return Deviation Short-term Bonds 200,000 10% 4.6% 1.6% Domestic Large-Cap 600,000 30% 12.4% 19.5% Equities Domestic Small Cap 1.200.000 60% 16.0% 29.9% Equities Total Portfolio 2,000,000 100% 13.8% 23.1% Smith soon expects to receive an additional $2 million and plans to invest the entire amount in an index fund that...
A) index funds/ money market mutual funds/ sector funds
B)esctor funds/index funds/money market mutual funds
C) money market mutual funds/index funds/sector funds
6. Mutual funds by risk and return Risk and Return of Money Market Mutual Funds, Sector Funds, and Index Funds The following three fund types differ in general price volatility and potential for return money market mutual funds, sector funds, and index funds Label the graph that follows to show the relative volatility and potential return of these...
John's current portfolio of S500,000 is invested as follows: Expected annual Current Value Annual standard return $100,000 Bonds 12% S250,000 HSBC shares 8% 12% S150,000 SaSa shares 10% 18% John soon expects to receive a gratuity of S200,000 and plans to invest the entire amount in an index fund that best complements the current portfolio. John is considering the following four index funds. His selection criteria are to maintain or increase the expected return of the current portfolio and maintain...
in i Maximum investment in the internet fund (c) Suppose that a second dient with $50,000 to invest has been dassified as an aggressive investor. B&R recommends that the maximum portfolio risk rating for a aggressive investor is 320. What is the recommended investment portfolio for this aggressive investor? Internet Fund Blue Chip Fund- Annual Return - (d) Suppose that a third dient with $50,000 to invest has been dlassified as a conservative investor. B&R recommends that the maximum portfolio...
Consider the following assets available for investment: 1. A stock index fund 2. A corporate bond fund 3. A utility fund 4. A global fund 5. A treasury fund You have research on the funds that has projected out the expected returns (in percent) for the funds along with the probabilities of those returns occurring. The following table shows the expectations: probability CBFUF SIF -18 Rec 15 -5 GF TE -20 3 -10 153 N Rec -7 wwww norm .3...
Problem 4 (15 marks). Consider the following information about a risky portfolio that you manage, and a risk-free asset: E(Tp) = 11%, p = 15%, ry = 5%. a) Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on her overall or complete portfolio equal to 8%. What proportion should she invest in the risky portfolio, P, and what proportion in the risk-free asset? (5 marks]...
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...
Problem 7-27 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...
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