iller & Washington (FMW) is an investment company located in Washington, DC. FMW primarily buys individual securities to create a portfolio. They do have a “Wealth Builder” portfolio that buy model ETFs. Their investment management fees range from 1% to 0.75%, with a $5,000 minimum annual fee. This creates a de-facto minimum account size of $500,000, if you’d like to keep your fees at 1%. FMW has been preparing a proposal in regard to portfolio composition for one of its client. Given that coefficient of risk aversion of the client is 2, expected return on an optimal portfolio of risky assets is 11.8%, expected risk free rate 4%, and standard deviation of an optimal risky portfolio is 25%, what proportion of funds should be allocated to risk
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Farr, Miller & Washington (FMW) is an investment company located in Washington, DC. FMW primarily buys individual securities to create a portfolio. They do have a “Wealth Builder” portfolio that buy model ETFs. Their investment management fees range from 1% to 0.75%, with a $5,000 minimum annual fee. This creates a de-facto minimum account size of $500,000, if you’d like to keep your fees at 1%.
FMW has been preparing a proposal in regard to portfolio composition for one of its client.
Given that coefficient of risk aversion of the client is 2, expected return on an optimal portfolio of risky assets is 11.8%, expected risk free rate 4%, and standard deviation of an optimal risky portfolio is 25%, what proportion of funds should be allocated to risky asset?
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