Explore BrainMass
Share

# Rate of Return-Investment Theory

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Scenario:
Roger has just been hired as chief portfolio officer of Bear United Capital. As part of this new position, he has been asked to assemble a model portfolio from a set of assets. The assets in the model portfolio include the following:

Please see attached word document for data set.

Using the above assets from the model portfolio and their associated values, calculate the following:
-The rate of return of the portfolio
-The expected rate of return on the portfolio
-Discuss your perception of the two returns and what is driving each in detail
-Which return is a better measure of return on a portfolio, and when should you use each?

#### Solution Preview

Please see attachment for complete solution.

Roger has just been hired as chief portfolio officer of Bear United Capital. As part of this new position, he has been asked to assemble a model portfolio from a set of assets. The assets in the model portfolio include the following:
Weight Expected Return Actual Return
Stock A 0.2 0.05 0.09
Stock B 0.1 0.07 0.04
Stock C 0.25 0.12 0.14
Stock D 0.05 0.02 0.04
Stock E 0.1 0.04 0.01
Stock F 0.3 0.35 -0.02

Using the above assets from the model portfolio and their associated values, calculate the following:
• The rate of return of the portfolio
Weight Actual Return Weighted Return - ...

#### Solution Summary

The rate of return-investment theories are examined.

\$2.19

## Modern Investment Theory I

This assignment is concerned with your understanding of the key issues relative to portfolio analysis and investment. In completing this assingment you are to limit your scope to the US stock markets only. Write a 2-page essay which you will use with new clients of your financial planning business which addresses the following issues and/or practices:

- How individual investors make investment decisions in practice rather than in theory; and
- How investors manage their funds/savings/investments in light of current stock markets.

In your response, build upon extant portfolio theory and make sure to talk about different types of risks that investors might face and how they go about managing such risks. This means you need to consider topics such as efficient frontier and optimal portfolios; as well their relevance to investment theory. Furthermore, given the nature of the assignment, avoid bringing the brokeage industry into your discussion. In other words, assume you can invest directly in the stock market and do not need any financial intermediaries like brokerage houses.

View Full Posting Details