← → C A bartleby bartleby.com/questions-and-answers/risk-analysis-a-financial-investor-builds-a-portfolio-that-is-worth-an-expected-pound35mil.-the-inve/eeced5b0-c354-451... ☆ វា New Chrome available Homework help starts here! learn write ✓ plus study resources ASK AN EXPERT √x MATH SOLVER Business » Economics >> RISK ANALYSIS A financial investor builds a portfolio that is worth an expected £35mil. The investor knows that his analysts can build a model to boost the potential return... Managerial Economic... ☐ MANAGERIAL 5th Edition BUY Chapte... Question ISBN: 9781337106665 Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor Publisher: Cengage Learning RISK ANALYSIS A financial investor builds a portfolio that is worth an expected £35mil. The investor knows that his analysts can build a model to boost the potential return from the portfolio investment. The additional return has a Normal Distribution with mean £3mil and standard deviation £0.5mil. The investor wishes to sell his financial services at a price that guarantees his expected profit will be 5% of the total return from the portfolio. < Problem 17.1IP Section... !!! See similar textbooks Practice Packs 1. What should the price of his financial service be? 2. Simulate (with a min of 200 repetitions) the average and the standard deviation of the profit the financial advisor realizes when setting the price for his services between 1% and 10% of the total expected return from the portfolio. Then discuss your findings. Comparative and absolute advantage Expert Solution 0 5 QUESTIONS 17°C Cloudy Q Search SAVE JB 13:38 11/04/2024 PRE ← 0 G bartleby.com/questions-and-answers/risk-analysis-a-financial-investor-builds-a-portfolio-that-is-worth-an-expected-pound35mil.-the-inve/eeced5b0-c354... Q✰ Homework help starts here! ASK AN EXPERT √x MATH SOLVER Complement and substitute goods 5 QUESTIONS 0 RISK ANALYSIS A financial investor builds a portfolio ... START PRACTICE Consumer and Producer Equilibrium 5 QUESTIONS 0 Given: - Mean of additional return = £3mil - Standard deviation of additional return = £0.5mil - Portfolio value = £35mil - Expected profit target = 5% of total return = £1.9mil (£38mil * 0.05) START PRACTICE Profits for prices ranging from 1% to 10% of the total expected return from the portfolio (£38mil) and calculate their averages and standard deviations. SHOW MORE + Price (% of portfolio return) | Average Profit (£mil) | Standard Deviation (£mil) 1% 2% 3% ક શ ૭ એ ક 5% 6% 7% 8% 9% 10% 17°C Q Search Cloudy | 0.8 1.3 | 0.191 | 0.245 1.8 | 2.3 | 2.8 0.288 | 0.327 | 0.362 | 3.3 | 0.393 | 3.8 | 0.421 4.3 | 0.446 | 4.8 | 0.468 5.3 | 0.487 These results indicate that as the price of the financial service increases, the average profit also increases, which is expected as the investor retains a larger portion of the total return. However, the standard deviation also increases, suggesting higher variability or risk associated with the profits. Therefore, the investor needs to strike a balance between setting a higher price to maximize profit and ensuring the risk associated with the variability of profits is acceptable. Additionally, factors such as competition, client base, and value proposition should also be considered when setting the price for financial services. Solution J O W X ☐ > New Chrome available 62 13:38 11/04/2024 PRE