Chapter 16, Problem 3FPC

Annie Williams is considering a retirement portfolio and wonders if she should move some of her money into an international investment. She has been working for a short time period (she graduated University just four years ago, she has put her retirement savings into a mutual fund whose strategy mimicked the return of the S&P 500 stock index/ large company stock), this fund has historically earned a return averaging 12% over the last 80 years, but recently the returns were somewhat depressing, as the economy is going through a mild recession because of this Annie is considering an international mutual fund that diversifies its holdings around the industrialized economies of the world and average 14% annual rate of return. The international funds higher average return is offset by the fact that the standard deviation in its return is 30% compared to only 20% for the domestic index fund. Reviewing more closely, she learned that the domestic and international fund tend to earn high…

Stephanie Carter has been gifted a sum of $50,000 by her grandparents on completing hergraduation successfully. She is a fresh finance graduate and is excited to invest some money inthe capital market, for which she intends to use the gifted sum of $50,000. However, insteadof committing this money to the market immediately, she decides to wait for some time, workin the field and acquire some experience before proceeding with her intended investment. Shethus contemplates an extremely conservative investment in a portfolio of stocks and bonds, atthe start of year 5 from now. For now, she will leave the $50,000 in a fixed deposit with thebank which promises an interest rate of 6% per annum.She will require a return of at least 9% on her stock investments and 4% on bond investments.Stephanie would have to pay 25% taxes on any interest income. Dividends will be tax-free.Stephanie’s research has allowed her to narrow down on the following investment candidates:Stocks:1. Pan-Elixir Ltd. is a…

Stephanie Carter has been gifted a sum of $50,000 by her grandparents on completing hergraduation successfully. She is a fresh finance graduate and is excited to invest some money inthe capital market, for which she intends to use the gifted sum of $50,000. However, insteadof committing this money to the market immediately, she decides to wait for some time, workin the field and acquire some experience before proceeding with her intended investment. Shethus contemplates an extremely conservative investment in a portfolio of stocks and bonds, atthe start of year 5 from now. For now, she will leave the $50,000 in a fixed deposit with thebank which promises an interest rate of 6% per annum.She will require a return of at least 9% on her stock investments and 4% on bond investments.Stephanie would have to pay 25% taxes on any interest income. Dividends will be tax-free.Stephanie’s research has allowed her to narrow down on the following investment candidates: Stocks:1. Pan-Elixir Ltd. is a…