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Sergio039 [100]
3 years ago
8

Returns and Actions Kunal Nayyar from London, had $60,000 in investments in the USA at the beginning of the year that consisted

of a diversified portfolio of stocks (40 percent), bonds (40 percent), and cash equivalents (20 percent). His returns over the past 12 months were 14 percent on stocks, 5 percent on bonds, and 1 percent on cash equivalents. What is Kunal's average return for the year? Round your answer to one decimal place. % If Kunal wanted to rebalance his portfolio to its original position, what specific actions should he take?
Business
1 answer:
AlekseyPX3 years ago
5 0

Answer:

Average rate of return is 7.8% , and total amount is $4,680

If Kunal wanted to rebalance his portfolio to its original position, he needs to transfer $672 (= $25,872 - $25,200) from stock account to bond account  and $816 ( = $12,936 - $12,120) from stock account to cash.

Explanation:

Total return for year = 14% * (40% of $60,000) + 5% * (40% of $60,000+ 1% *(20% of $60,000) = $4,680

Average rate of return = $4,680/ $60,000 = 7.8%

At beginning, the amount in per diversified portfolio is as below:

  • Amount invested in stock = 40% * $60,000 = $24,000
  • Amount invested in bond = 40% * $60,000 = $24,000
  • Amount in cash = 20% *$60,000 = $12,000

After receiving return, the amount in per diversified portfolio is as below:

Amount invested in stock = $24,000 *(1+14%) = $27,360

  • Amount invested in bond = $24,000 *(1+5%) = $25,200
  • Amount in cash = $12,000 * (1 + 1%) = $12,120

And amount in Kunal’s investment fund  = $27,360 + $25,200 + $12,120 = $64,680

 

If Kunal wanted to rebalance his portfolio to its original position, the amount in per diversified portfolio is as below:

Amount invested in stock = 40% * $64,680 = $25,872

  • Amount invested in bond = 40% * $64,680 = $25,872
  • Amount in cash = 20% *  $64,680 = $12,936

⇒ Kunal needs to transfer $672 (= $25,872 - $25,200) from stock account to bond account  and $816 ( = $12,936 - $12,120) from stock account to cash.

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One year ago, you purchased 300 shares of Southern Cotton at $32.60 a share. During the past year, you received a total of $280
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Answer:

Total Return on investment=12.678%≅12.68%

Explanation:

Given;

Number of Shares= 300

Purchasing price of each share=$32.60

Total Dividends= $280

Selling price of each share= $35.80

Find:

Total Return on investment=?

Solution:

Total Return on investment=\frac{(Selling\ Price-Purchase\ Price + \frac{Total\ Dividends}{Shares})}{Purchase\ Price}

Total\ Return\ on\ investment=\frac{\$35.80-\$32.60 +\frac{\$280}{300}}{\$32.60} \\

Total Return on investment=0.12678

In Percentage:

Total Return on investment=12.678%≅12.68%

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The correct answer is option B.

Explanation:

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On October 10, the stockholders’ equity of Sherman Systems appears as follows. Common stock–$10 par value, 74,000 shares authori
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Answer:

1,                            Journal entries

Date    Account and explanation         Debi$       Credit$

          Treasury stock (5200*27)          140,400

           Cash                                                              140,400

           (To record purchase treasury stock)

            Cash (1,050*33)                           34,650  

            Paid in capital from sale of treasury stock    6,300

            Treasury stock (1,050*27)                               28,350

             (To record sale of treasury stock)  

              Cash (4,150*22)                             91,300

              Paid in capital from sale of            6,300

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              Retained earnings                         14,450

              Treasury stock (4,150*27)                                112,050

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2.  Revised equity section

<u>Contributed capital</u>

Common Stock                             740,000

Paid in capital in excess of           <u>226,000</u>

par value-Common Stock

Total paid in capital                        966,000

Retained earnings                         <u> 880,000</u>

Total                                                1,846,000

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Total Stockholder's equity            $<u>1,705,600</u>

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