(Portfolio expected rate of return) Barry Swifter is 60 years of age and considering retirement. Barry's retirement portfolio currently is valued at $750,000 and is allocated in Treasury bills, an S&P 500 index fund, and an emerging market fund as follows: a. Based on the current portfolio composition and the expected rates of return given above, what is the expected rate of return for Barry's portfolio? b. Barry is considering a reallocation of his investments to include more Treasury bills and less exposure to emerging markets. If Barry moves all of his money from the emerging market fund and puts it in Treasury bills, what will be the expected rate of return on the resulting portfolio?

(Portfolio expected rate of return) Barry Swifter is 60 years of age and considering retirement. Barry's retirement portfolio currently is valued at $750,000 and is allocated in Treasury bills, an S&P 500 index fund, and an emerging market fund as follows: a. Based on the current portfolio composition and the expected rates of return given above, what is the expected rate of return for Barry's portfolio? b. Barry is considering a reallocation of his investments to include more Treasury bills and less exposure to emerging markets. If Barry moves all of his money from the emerging market fund and puts it in Treasury bills, what will be the expected rate of return on the resulting portfolio?

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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D4) An investor has total wealth of $50,000 and wants to invest in a portfolio with 3 securities A, B, and C with expected returns E(RA) = 20%, E(RB) = 15% and E(RC) =17% respectively. If he chooses to invest $25,000 in security A, $12,500 in security B, and $12,500 in security C, what will be the expected return of this portfolio? State your answer as a percentage rate (such as 5.55)
(Future value) Sarah Wiggum would like to make a single lump-sum investment and have $1.7 million at the time of her retirement in 28 years. She has found a mutual fund that expects to earn 77 percent annually. How much must Sarah invest today? If Sarah earned an annual return of 14 percent, how much must she invest today?
(Related to Checkpoint 5.4) (Present value) Sarah Wiggum would like to make a single investment and have $2.0 million at the time of her retirement in 35 years. She has found a mutual fund that will eam 4 percent annually. How much will Sarah have to invest today? If Sarah eamed an annual return of 14 percent, how soon could she then retire? a. If Sarah can eam 4 percent annually for the next 35 years, the amount of money she will have to invest today is $ (Round to the nearest cent).
You are going to invest in a stock mutual fund with a front-end load of 6 percent and an expense ratio of 1.39 percent. You also can invest in a money market mutual fund with a return of 2.6 percent and an expense ratio of 0.10 percent. If you plan to keep your investment for 2 years, what annual return must the stock mutual fund earn to exceed an investment in the money market fund? What if your investment horizon is 9 years? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. 2 Years 9 Years Annual Return % %
Henrietta Marston plans to retire in the year 2050. She is considering a fund that will be more risk-oriented now and become increasingly conservative as she approaches retirement. Which of the following funds would you recommend to her? A) Regional fund B) Equity income fund OC) Sector fund OD) Fund of funds E) Life-cycle fund
Future value (with changing interest rates). Jose has $3,000 to invest for a 6-year period. He is looking at four different investment choices. What will be the value of his investment at the end of 6 years for each of the following potential investments? a. Bank CD at 3%. b. Bond fund at 7.5%. c. Mutual stock fund at 14%. d. New venture stock at 21%. a. What will be the value of Jose's bank CD investment that offers an annual rate of return of 3% for 6 years? (Round to the nearest cent.) $
Sarah Wiggum would like to make a single investment and have $1.2 million at the time of her retirement in 30 years. She has found a mutual fund that will earn 4 percent annually. How much will Sarah have to invest today? If Sarah invests that amount and could earn a 14 percent annual return, how soon could she retire, assuming she is still going to retire when she has $1.2 million? Click on the table icon to view the PVIF table To have $1.2 million at retirement, the amount Sarah must invest today is $ (Round to the nearest cent.)
Alecia is a financial investor who actively buys and sells in thesecurities market. Now she has a portfolio of all blue chips, including: $13 500of Share A, $7600 of Share B, $14 700 of Share C, and $5 500 of Share D.Required:a) Compute the weights of the assets in Rachel’s portfolio?b) Following is forecast for economic situation and Alecia’s portfolio returnsnext year, calculate the expected return, variance and standard deviationof the portfolio.State of economy Probability Rate of returnsMild Recession 0.35 - 5%Growth 0.45 15%Strong Growth 0.20 30%
Suppose Rosa is choosing how to allocate her portfolio between two asset classes: risk-free government bonds and a risky group of diversified stocks. The following table shows the risk and return associated with different combinations of stocks and bonds. Combination A B C D E Fraction of Portfolio in Diversified Stocks (Percent) 0 25 50 75 100 Average Annual Return (Percent) 2.00 4.50 7.00 9.50 12.00 If Rosa reduces her portfolio's exposure to risk by opting for a smaller share of stocks, she must also accept a Sell some of her bonds and use the proceeds to purchase stocks Accept more risk Standard Deviation of Portfolio Return (Risk) (Percent) 0 5 10 15 20 Suppose Rosa currently allocates 25% of her portfolio to a diversified group of stocks and 75% of her portfolio to risk-free bonds; that is, she chooses combination B. She wants to increase the average annual return on her portfolio from 4.5% to 9.5%. In order to do she must do which of the following? Check all that apply. Sell…
27) Albreit Doghut, a portfolio manager of the Danielson Financial Group meets with Kristina Teqward, a client, to discuss investments objectives and constraints to be reflected in an Investment Policy statement. Albreit Doghut established that Kristina Teqward: pursues a long, comfortable retirement where she seeks to have little compromise in her lifestyle or concerns regarding her financial future plans to retire from her job in 10 years, after which this portfolio will be her primary source of income given that annual pension is expected to be relatively low. all capital gains are taxed at 20% and ordinary income - at 30%. To complete the assessment of investment constraints, Albreit Doghut still needs to inquire about Kristina Teqward's: Select one or more: tax concerns unique needs time horizon liquidity needs
You are considering an investment in a mutual fund with a 5% load and an expense ratio of 0.75%. You can invest instead in a bank CD paying 3% interest. Required: a. If you plan to invest for 3 years, what annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Assume annual compounding of returns. b. What annual rate of return must the fund portfolio earn if you plan to invest for 6 years to be better off in the fund than in the CD? c. Now suppose that instead of a front-end load the fund assesses a 12b-1 fee of 0.50% per year. What annual rate of return must the fund portfolio earn for you to be better off in the fund than in the CD? Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Portfolio rebalancing is the process of bringing your different asset classes (stocks, bonds, and cash) back into proper relationship following a significant change in the value of one or more of them. You should monitor your investments and normally rebalance your portfolio about once a year to return your investments to their proper balance when they no longer conform to your investment plan. Suppose that you begin an investment program with a portfolio having an asset allocation of 30% bonds, 60% equities, and 10% cash investments. One year later, you find that some investments have performed better than others. After a year, the portfolio now consists of 40% bonds, 40% equities, and 20% cash investments. To rebalance this portfolio back to its original asset allocation, you should sell some of your and use the proceeds to purchase additional .

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