Constructing an Appropriate Portfolio.
Not what you're looking for?
You are the financial adviser to three individuals, a young person with high risk tolerance, a middle-aged person with medium risk tolerance and an old person with low risk tolerance. Here are the current conditions:
- Risk free asset earning 12 % per year
- Risky asset (or market portfolio) with expected return of 30% per year and standard deviation of 40%.
a. Construct an appropriate portfolio for your young client and estimate the expected return and standard deviation of your young client for the coming year.
b. Construct an appropriate portfolio for your middle aged client and estimate the expected return and standard deviation of your middle aged client.
c. Construct an appropriate portfolio for your old client and estimate the expected return and standard deviation of your old client.
d. If your middle aged client requires a portfolio with a standard deviation of 30%, what is its expected rate of return?
Purchase this Solution
Solution Preview
Let's make some assumptions:
-the young client is ambitious, he is looking for ways aim for higher returns. Of course, young people are generally risk-loving, so they are willing to take more risks. Finally, the young client does not have a family, so he doesn't have mortgages or loans to take care of.
-the middle aged client is a bit less ambitious. He has mortgages and has to save for his kids' college tuitions and ...
Purchase this Solution
Free BrainMass Quizzes
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Organizational Leadership Quiz
This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.
Motivation
This tests some key elements of major motivation theories.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.