The Knowles/Armitage (KA) group at Merrill Lynch advises clients on how to create a diversified investment portfolio. One of the investment alternatives they make available to clients is the All World Fund composed of global stocks with good dividend yields. One of theirclients is interested in a portfolio consisting of investment in the All World Fund and a treasury bond fund. The expected percent return of an investment in the All World Fund is 9.70% with a standard deviation of 17.50%. The expected percent return of an investment in atreasury bond fund is 4.10% and the standard deviation is 4.10%. The covariance of an investment in the All World Fund with an investment in a treasury bond fund is -10.7.a. Which of the funds would be considered the more risky?All World stock fundWhy?It has a larger standard deviation vb. If KA recommends that the client invest 75% in the All World Fund and 25% in the treasury bond fund, what is the expected percent return and standard deviation for such a portfolio?Expected return(to 3 decimals)Standard deviation(to 3 decimals)What would be the expected return and standard deviation, in dollars, for a client investing $10,000 in such a portfolio?Expected return(to the nearest cent)$4Standard deviation(to the nearest cent)c. If KA recommends that the client invest 25% in the All World Fund and 75% in the treasury bond fund, what is the expected return and standard deviationsuch a portfolio?Expected return(to 3 decimals)Standard deviation(to 3 decimals)What would be the expected return and standard deviation, in dollars, for a client investing $10,000 in such a portfolio?Expected return24(to the nearest cent)Standard deviation%24(to the nearest cent)d. Which of the portfolios in parts (b) and (c) would you recommend for an aggressive investor?I would recommend the portfolio in Part bO for an aggressive investor because it has a larger returnWhich would you recommend for a conservative investor?I would recommend the portfolio in Part cfor a conservative investor because it has a lower standard deviation v

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MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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Along with interest rates, life expectancy is a component in pricing financial annuities. Suppose that you know that last year average life expectancy was 77 years for your annuity holders. Now you want to know if your clients this year have a longer life expectancy, on average, so you randomly sample n=20 of your recently deceased annuity holders to see actual age at death. Using a 5% level of significance, test whether or not the new data shows evidence of your annuity holders now live longer than 77 years, on average. The data below are the sample data (in years of life): (78,75,83,81,81,77,78,79,79,81,76,79,77,76,79,81,73,74,78,79) Does this sample indicate that life expectancy has increased? Test an appropriate hypothesis and state your conclusion (use a 5% level of significance). Be sure to check the necessary assumptions and conditions before conducting your test. Construct A 90% confidence interval for the true average age of death for the…
An investor wants to invest $300,000 in a portfolio of three mutual funds. The annual fund returns are normally distributed with a mean of 2.00% and standard deviation of 0.30% for the short-term investment fund, a mean of 5.00% and standard deviation of 2.50% for the intermediate-term fund, and a mean of 6.25% and standard deviation of 5.50% for the long-term fund. An initial plan for the investment allocation is 45% in the short-term fund, 35% in the intermediate-term fund, and 20% in the long-term fund. a. Use Analysis ToolPak, with a seed of 1, to develop a Monte Carlo simulation with 100 trials to estimate the mean ending balance after the first year. Note: Round the final answer to two decimal places. Mean ending balance after the first year b. If the allocation is changed to 30% short-term, 55% intermediate-term, and 15% long-term, estimate the ending balance after the first year. Note: Round the final answer to two decimal places. Mean ending balance after the first year c.…
.A new, miracle diabetes drug that diminishes major symptoms of diabetes has been approved by the FDA. Health care professionals and researchers believe that the new drug will prolong lifespan of diabetes patients. If the population is in steady state and the incidence is constant, what will the effect of this new drug be on the prevalence of diabetes in the population? Explain.
4. Along with interest rates, life expectancy is a component in pricing financial annuities. Suppose that you know that last year average life expectancy was 77 years for your annuity holders. Now you want to know if your clients this year have a longer life expectancy, on average, so you randomly sample n=20 of your recently deceased annuity holders to see actual age at death. Using a 5% level of significance, test whether or not the new data shows evidence of your annuity holders now live longer than 77 years, on average. The data below are the sample data (in years of life): (78,75,83,81,81,77,78,79,79,81,76,79,77,76,79,81,73,74,78,79) a) Does this sample indicate that life expectancy has increased? Test an appropriate hypothesis and state your conclusion (use a 5% level of significance). Be sure to check the necessary assumptions and conditions before conducting your test. b) Construct A 90% confidence interval for the true average age of death for the population of your annuity…
If a fictional treatment costs a total of $45,000 at today’s value and increases a person’s quality of life from 0.5 to 0.6 for the remainder of the person’s life from age 70 onward, and the person’s expected life span increases from 73 to 75, what is the total gain in QALYs (Quality-adjusted Life Years), and what is the ICER (Incremental Cost-effectiveness Ratio)?
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Example 10: P and Q two securities, with expected returns of 15% and 24% respectively, and standard deviation of 35% and 52% respectively. Calculate the standard deviation of a portfolio weighted equally between the two securities if their correlation is -0.9.
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A family purchases a 2000 square foot home and plans to make extensions totalling 500 square feet. The house currently has a pool, and a real estate agent has reported that the house is in excellent condition. However, the house does not have a view, and this will not change as a result of the extensions. According to the results in column (1), what is the expected DOLLAR increase in the price of the home due to the planned extensions?
Under what circumstances would the trendline be significantly deviated by an outlier?
5. The changes in the values of two investment portfolios are modelled as Normal distributions. From day to day, the first investment portfolio changes in value with mean 2.6% and standard deviation 1.8%. From day to day, the second investment portfolio changes in value with mean 2.2% and standard deviation 2.5%. An investor is hoping for growth of at least 4%. Which portfolio is most likely to give growth of 4%?

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