A friend has confided in you that they have recently inherited a moderately sized investment portfolio from a relative. They don’t know what to do with the assets. The friend comes to you for advice. Your immediate advice, of course, is for your friend to seek professional advice from a tax expert as well as a financial adviser. Your friend persists, however, and asks how the investment returns of the portfolio compare to other investments. You agree to review the portfolio and calculate the yields of each investment as well as determine the weighted average yield for the entire portfolio. Refer to the attached investment schedule. For your quantitative analysis compute the current market value of each security position of the portfolio, calculate individual yields based on current market pricing, and determine the weighted average factor and the weighted average yields. Explain the basis upon which you determined the weighted average yield. Explain the difference between a yield that is based on cost, as opposed to one that is based on current market value. What are the different uses of both? What non-quantitative observations can you make about the portfolio?
A friend has confided in you that they have recently inherited a moderately sized investment portfolio from a relative. They don’t know what to do with the assets. The friend comes to you for advice. Your immediate advice, of course, is for your friend to seek professional advice from a tax expert as well as a financial adviser. Your friend persists, however, and asks how the investment returns of the portfolio compare to other investments. You agree to review the portfolio and calculate the yields of each investment as well as determine the weighted average yield for the entire portfolio. Refer to the attached investment schedule. For your quantitative analysis compute the current market value of each security position of the portfolio, calculate individual yields based on current market pricing, and determine the weighted average factor and the weighted average yields. Explain the basis upon which you determined the weighted average yield. Explain the difference between a yield that is based on cost, as opposed to one that is based on current market value. What are the different uses of both? What non-quantitative observations can you make about the portfolio?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A friend has confided in you that they have recently inherited a moderately sized investment portfolio from a relative. They don’t know what to do with the assets. The friend comes to you for advice. Your immediate advice, of course, is for your friend to seek professional advice from a tax expert as well as a financial adviser. Your friend persists, however, and asks how the investment returns of the portfolio compare to other investments. You agree to review the portfolio and calculate the yields of each investment as well as determine the weighted average yield for the entire portfolio.
Refer to the attached investment schedule. For your quantitative analysis compute the current market value of each security position of the portfolio, calculate individual yields based on current market pricing, and determine the weighted average factor and the weighted average yields.
- Explain the basis upon which you determined the weighted average yield.
- Explain the difference between a yield that is based on cost, as opposed to one that is based on current market value.
- What are the different uses of both?
- What non-quantitative observations can you make about the portfolio?
Transcribed Image Text:A
D
E
G
H
Portfolio
Weighted
Current
Market
Price
Current Estimated Estimated Weighted
Type of
Stock Position
Symbol (# of
Market Dividend/ Current
Yield
Company Name
Average
Average
Investment
Value
Interest
Factor
Yield
1
shares)
2 Common stock Altria
3 Common stock AT&T
4 Common stock Chevron
5 Common stock Coca Cola
6 Common stock Duke Energy
$247.00 U
$325.00
мо
119
50.04
173
32.09
U
CVX
26
125.82
$111.00
ко
59
54.33
U
$77.00
U
$206.00
$86.00
DUK
65
87.68
7 Common stock Johnson & Johnson
JNJ
31
128.84
U
U
8 Common stock McDonalds
9 Common stock Pepsi Cola
10 Common stock Philip Morris Intl
11 Common stock Proctor & Gamble
$176.00
$44.00
MCD
52
214.31
PEP
17
130.74
PM
70
86.75
$280.00
U
U
PG
52
113.85
U
$133.00
12
13
Total Portfolio Market Value
14
Weighte Averatge Yield:
15
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