Client No. 1 Mr. A. Smith is a 25-year-old college graduate who holds a steady job as a valued employee in a blue-chip company. He is married with two young children. In the few years that he has been working he has built up two ($2 m) cash reserves in the bank. He also has adequate insurance coverage. Mr Smith has a moderate to high risk profile depending on the type of investment. His current short term and long-term goal is to acquire a house and car and build a long term retirement fund and college fund for his children. Client No 2. Mr. B. Philips is 60 years of age and is planning to retire in the next four years . He is in excellent health, pursues a simple but active lifestyle, and has two adult children. He has interest in a private company for $20 million. As part of his estate planning he has decided that he will donate half of this to a charity upon his death. He now realizes that an appropriate investment policy and asset allocations are required if his goals are to be met through investment of his considerable assets. Mr. Philips has a conservative to moderate risk preference. Currently, the following assets are available for use in building an appropriate portfolio for him: $10.0 million cash (from sale of the private company interest, net of a $10 million that he planned to give to charity) $10.0 million stocks and bonds ($5 million each) $ 5.0 million in investment property (now fully leased) $ 10.0 million value of his residence $30.0 million in total available assets Recommend and justify a long-term asset allocation that is consistent with the investment policy statement you created in Part a. Briefly explain the key assumptions you made in generating your allocation.
Client No. 1
Mr. A. Smith is a 25-year-old college graduate who holds a steady job as a valued employee in a blue-chip company. He is married with two young children. In the few years that he has been working he has built up two ($2 m) cash reserves in the bank. He also has adequate insurance coverage. Mr Smith has a moderate to high risk profile depending on the type of investment. His current short term and long-term goal is to acquire a house and car and build a long term retirement fund and college fund for his children.
Client No 2.
Mr. B. Philips is 60 years of age and is planning to retire in the next four years . He is in excellent health, pursues a simple but active lifestyle, and has two adult children. He has interest in a private company for $20 million. As part of his estate planning he has decided that he will donate half of this to a charity upon his death. He now realizes that an appropriate investment policy and asset allocations are required if his goals are to be met through investment of his considerable assets. Mr. Philips has a conservative to moderate risk preference. Currently, the following assets are available for use in building an appropriate portfolio for him:
$10.0 million cash (from sale of the private company interest, net of a $10 million that he planned to give to charity)
$10.0 million stocks and bonds ($5 million each)
$ 5.0 million in investment property (now fully leased)
$ 10.0 million value of his residence
$30.0 million in total available assets
Recommend and justify a long-term asset allocation that is consistent with the investment policy statement you created in Part a. Briefly explain the key assumptions you made in generating your allocation.
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