An investment advisor currently has two types of investments available for clients: a conservative investment A that pays 8% per year and investment B of higherrisk that pays 14%. Clients may divide their investments between the two to achieve any total return desired between 8% and 14%. However, the higher the desired return,the higher the risk. How should each client listed in the table invest to achieve the desired return?Client 1 Client 2 Client 3 k$21000 $40000 $31000 k,Annual Return Desired $2460 $3860 $3740 k2Total InvestmentHow much money should Client 1 invest in each account to achieved the desired return?Amount in investment A:Amount in investment B:How much money should Client 2 invest in each account to achieved the desired return?Amount in investment A:Amount in investment B:How much money should Client 3 invest in each account to achieved the desired return?Amount in investment A:Amount in investment B:

Investment means engaging your funds to generate profit in coming years. Investors invest in…

An investment advisor currently has two types of investments available for clients: a conservative investment A that pays 8% per year and investment B of higher risk that pays 14%. Clients may divide their investments between the two to achieve any total return desired between 8% and 14%. However, the higher the desired return, the higher the risk. How should each client listed in the table invest to achieve the desired return? Client 1 Client 2 Client 3 k Total Investment $21000 540000 531000 k, Annual Return Desired $2460 $3860 $3740 k2 How much money should Client 1 invest in each account to achieved the desired return? Amount in investment A: Amount in investment B: How much money should Client 2 invest in each account to achieved the desired return? Amount in investment A: Amount in investment B: How much money should Client 3 invest in each account to achieved the desired return? Amount in investment A: Amount in investment B:

An investment advisor currently has two types of investments available for clients: a conservative investment A that pays 8% per year and investment B of higher risk that pays 14%. Clients may divide their investments between the two to achieve any total return desired between 8% and 14%. However, the higher the desired return, the higher the risk. How should each client listed in the table invest to achieve the desired return? Client 1 Client 2 Client 3 k Total Investment $21000 540000 531000 k, Annual Return Desired $2460 $3860 $3740 k2 How much money should Client 1 invest in each account to achieved the desired return? Amount in investment A: Amount in investment B: How much money should Client 2 invest in each account to achieved the desired return? Amount in investment A: Amount in investment B: How much money should Client 3 invest in each account to achieved the desired return? Amount in investment A: Amount in investment B:

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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Mr. Ota is an analyst for a large pension fund and he has been assigned the task of evaluating two different external portfolio managers (K and C). He considers the following historical average return, standard deviation, and CAPM beta estimates for these two managers over the past five years: Actual Average Standard deviation Portfolio Beta Return Manager K Manager C 7.80% 10.05% 0.75 12.0% 15.50% 1.45 Additionally, Mr. Ota estimate for the risk premium for the market portfolio is 5.40% and the risk-free rate is currently 2.50%. a. For both Managers K and C, calculate the expected return using the CAPM. Express your answers to the nearest basis point (i.e., xX.XX%)
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Finance suppose you work for apple, inc. an American multinational technology company headquartered in Cupertino, California, as a financial analyst. You are provided with informaiton about three different investment oppotunities (Projects A, B, and C) that division managers believe are value-enhancing for the firm. The cash flows for each project are given below. As each project has the same risk, you may assume they all have a discount rate of 7.00% Determine The interenal rate of return of Project "C"
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The investment funds for your company includes the following: Stock $ Amount Invested Beta for Each Stock A $ 600,000 .8 B $ 1,800,000 1.4 C $ 2,400,000 1.7 D $ 700,000 -.6 E $ 3,000,000 1.1 You need to calculate the required rate of return for the investment. The market’s required return for Year 2020 is 12% and the risk free rate is 3% Show your work on the following: Calculate the average beta for the portfolio. Calculate the required rate of return for the entire portfolio. The CFO of your company is anticipating that the stock market will be decreasing in the near future. Please give a recommendation on which stock the company should sell and which stock the company should buy. The CFO also wants you to explain your answer.
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As a junior investment manager, your boss instructs you to help a client to invest $100,000for the next year. Particularly, you are asked to form an investment portfolio for the clientby investing in risk-free assets like 90-day bank bill and two stocks: A and B. Stock A hasa beta value of 0.8, an expected return of 7% and a standard deviation of 10%; and stockB has a beta value of 1.2, an expected return of 12% and a standard deviation of 15%.The correlation coefficient between the returns for the two stocks is 0. The risk-free rate is2%.(a) What is the expected return of the risky portfolio with the two stocks that has theleast amount of risk?(b) Suppose that the optimal risky portfolio with the two stocks has a weight of 53% inA and 47% in B, and has the expected return of 9.4% and standard deviation of8.8%. If this client is willing to take a risk measured by standard deviation of 5% forhis overall investment portfolio, how much would you recommend to the client toinvest in the…
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