Portfolio Analysis (Er) (30 points) 3. You have worked with your client and put together an investment portfolio based on the client's preferences for risk. The portfolio will be divided among several asset classes defined below. Asset Class Allocation Expected Return Standard Deviation of Returns 10 Year T-Bonds 37% 4.13% 0.00% International Bonds (Private Corporate) 12% 6.32% 34.23% Rusell 2000 ETF 41% 6.70% 12.32% FTSE 100 ETF 10% 32.10% 21.30% 100% a. What is the expected return for this portfolio? Provide the result as x.xx%. b. What is the expected return for the portfolio if you decide not to invest in treasury bonds? Provide the result as x.xx%. c. What asset class would you eliminate to maximize expected return? Explain why.
Portfolio Analysis (Er) (30 points) 3. You have worked with your client and put together an investment portfolio based on the client's preferences for risk. The portfolio will be divided among several asset classes defined below. Asset Class Allocation Expected Return Standard Deviation of Returns 10 Year T-Bonds 37% 4.13% 0.00% International Bonds (Private Corporate) 12% 6.32% 34.23% Rusell 2000 ETF 41% 6.70% 12.32% FTSE 100 ETF 10% 32.10% 21.30% 100% a. What is the expected return for this portfolio? Provide the result as x.xx%. b. What is the expected return for the portfolio if you decide not to invest in treasury bonds? Provide the result as x.xx%. c. What asset class would you eliminate to maximize expected return? Explain why.
Chapter7: Types And Costs Of Financial Capital
Section: Chapter Questions
Problem 6EP
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Transcribed Image Text:Portfolio Analysis (Er)
(30 points)
3. You have worked with your client and put together an investment portfolio based on the client's
preferences for risk. The portfolio will be divided among several asset classes defined below.
Asset Class
Allocation
Expected Return
Standard Deviation of Returns
10 Year T-Bonds
37%
4.13%
0.00%
International Bonds (Private
Corporate)
12%
6.32%
34.23%
Rusell 2000 ETF
41%
6.70%
12.32%
FTSE 100 ETF
10%
32.10%
21.30%
100%
a. What is the expected return for this portfolio? Provide the result as x.xx%.
b. What is the expected return for the portfolio if you decide not to invest in treasury bonds? Provide
the result as x.xx%.
c. What asset class would you eliminate to maximize expected return? Explain why.
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