1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
garik1379 [7]
3 years ago
7

The Knowles/Armitage (KA) group at Merrill Lynch advises clients on how to create a diversified investment portfolio. One of the

investment alternatives they make available to clients is an All World fund composed of global stocks with good dividend yields. One of their clients is interested in a portfolio consisting of investment in the All World fund and a Treasury bond fund. The expected percent return of an investment in the All World fund is 7.80% with a standard deviation of 18.90%. The expected percent return of an investment in a Treasury bond fund is 5.50% and the standard deviation is 4.60%. The covariance of an investment in the All World fund with an investment in a Treasury bond fund is -12.4.
a. Which of the funds would be considered the more risky?

Why?

b. If KA recommends that the client invest 75% in the All World fund and 25% in the Treasury bond fund, what is the expected percent return and standard deviation for such a portfolio?

Expected return (Round your answer to three decimal places)
Standard deviation (Round your answer to two decimal places)
What would be the expected return and standard deviation, in dollars, for a client investing $10,000 in such a portfolio?

Expected return $
Standard deviation $
c. If KA recommends that the client invest 25% in the All World fund and 75% in the Treasury bond fund, what is the expected return and standard deviation for such a portfolio? Round your answer to three decimal places.

Expected return (Round your answer to three decimal places)
Standard deviation (Round your answer to four decimal places)
What would be the expected return and standard deviation, in dollars, for a client investing $10,000 in such a portfolio?

Expected return $
Standard deviation $
d. Which of the portfolios in parts (b) and (c) would you recommend for an aggressive investor?

Which would you recommend for a conservative investor?

Why?

Mathematics
2 answers:
stepladder [879]3 years ago
7 0

Answer:

Step-by-step explanation:

hello,

we will denote the expected return of investment in the all world fund as E(A).

we will also denote the standard deviation of investment in the world fund as S(A).

we will denote the expected return of investment in the treasury bond fund as E(T)

we will also denote the standard deviation of investment in the treasury bond fund as S(A).

A. since S(A) = 18.90% and S(T) = 4.60%. We see that the standard deviation for all world is greater than that of treasury fund, thus the fluctuation in all world fund is higher than that of treasury fund, hence the all world fund is more risky.

B. expected percent return of portfolio = (percentage investment in the all world × E(A) ) + (percentage investment in the treasury fund × E(T) )

       =( 75% × 7.80%) + ( 25% × 5.5%)

       = 7.225%

standard deviation percent of portfolio =  (percentage investment in the all world × S(A) ) + (percentage investment in the treasury fund × S(T) )

      =  (75% × 18.90%) + ( 25% × 4.60%)

      = 15.325%

expected return in dollars for a client investing $10,000

           = 7.225% × $10,000

          =  $722.500

standard deviation return in dollars for a client investing $10,000

       = 15.325% × $10,000

       = $1,532.500

C. similarly, we simply follow the same procedure in (b) above.

  expected percent return of portfolio =  ( 25% × 7.80%) + ( 75% × 5.5%)

                                                                  = 6.075%

standard deviation percent of portfolio = (25% × 18.90%) + ( 75% × 4.60%)

                                                                   = 8.175%

expected return in dollars for a client investing $10,000

           = 6.075% × $10,000

            = $607.5

standard deviation return in dollars for a client investing $10,000

       = 8.175% × $10,000

        = $817.5

D.   i will recommend portfolio (b) for an aggressive investor because it more risky since its standard deviation is $1,532.500 and it generates more expected return of $722.500 but i will advice a conservative investor to go for portfolio (c) because it is less risky since its standard deviation is  $817.5

Pani-rosa [81]3 years ago
4 0

Answer:

See the attached file for the answers.

Step-by-step explanation:

See the attached file for the explanation

You might be interested in
Can someone help me with this? (The ratio of 7th grade students to 8th grade students in a soccer league is 17:23. If there are
IrinaVladis [17]

Answer:

85

Step-by-step explanation:

You add 17 and 23 and you get 40 so 40=200 and divide 40 and 200 by 5 and so 1/40 =5 so 5x17=85.

sorry if I got it wrong I'm trying.

6 0
3 years ago
How do i use distributive property to express16 48?
Andrews [41]
8(2+6) = 16 + 48

or

16(1+3) = 16 + 48

or

4(4+12) = 16 + 48
6 0
3 years ago
Read 2 more answers
A number is multiplied by 4, and then 6 is added to the product.The result is 18.What is the number?
wolverine [178]
18-6=12
12÷4=3
your answer is 3
6 0
3 years ago
Read 2 more answers
The points (4,1) and (x,-6) lie on the same line. If the slope of the line is 1, what is the value of x?
bagirrra123 [75]

Answer:

x = -3

Step-by-step explanation:

Substitute the values m = 1 and from the points into the slope formula. Then solve for x.

m = \frac{y_2-y_1}{x_2-x_1}\\\\1 = \frac{1--6}{4-x}\\\\1 = \frac{7}{4-x}\\\\4-x = 7\\\\-3 = x

8 0
3 years ago
Evaluate each expression if r = 3,q = 1, and W =-2
GarryVolchara [31]

Answer:

2) - 12

3) - 1

4)y = 8

5)r = 4

6)x= -7/29

Hope it helps you

8 0
3 years ago
Other questions:
  • Two people walk daily for exercise. One is able to maintain 4.0 mph and the other only 3.5 mph. The slower walker has a mile ahe
    8·1 answer
  • audrey has 32 dimes and quarters in her piggy bank with a total value of $6.50. how many of the coins are dimes and how many are
    10·1 answer
  • If x=9, what is the value of your in the equation below? y=8x-(1+4x)
    10·2 answers
  • Amy wants to estimate 11% of $9.11. what is a good estimate of the answer
    12·1 answer
  • Please help me if possible
    12·1 answer
  • The cost of a ball is $0.58. David pays for the ball with
    9·2 answers
  • If TS is a midsegment of PQR find TS
    7·1 answer
  • Help please! Thanks!!
    15·1 answer
  • The exponent of a linear function is ___.<br> A. 2<br> B. 1/2<br> C. 1<br> D. X
    13·1 answer
  • - 16m’n-(-25m’n)+(-7m’n)Which of the following is equivalent to the expression above?
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!