CONNECT WITH LEARNSMART FOR BODIE: ESSE
11th Edition
ISBN: 2819440196246
Author: Bodie
Publisher: MCG
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Textbook Question
Chapter 22, Problem 2CP
Your client says, “With the unrealized gains in my portfolio, I have almost saved enough money for my daughter to go to college in eight years, but educational costs keep going up.” Based on this statement alone, which one of the following appears to be least important to your client's investment policy?
a. Time horizon.
b.
c. Liquidity.
d. Taxes.
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Students have asked these similar questions
1. The president of the Martin Company is considering two alternative invest-
ments, X and Y. If each investment is carried out, there are four possible
outcomes. The present value of net profit and probability of each outcome
follow:
Investment X
Investment Y
Net Present
Net Present
Outcome
Value
Probability Outcome
Value
$12 million
Probability
0.1
$20 million
0.2
A
8 million
10 million
2
0.3
B
9 million
0.3
3
0.4
6 million
0.1
3 million
0.1
D
11 million
0.5
a. What are the expected present value, standard deviation, and coefficient
of variation of investment X?
b. What are the expected present value, standard deviation, and coefficient
of variation of investment Y?
c. Which investment is riskier?
d. The president of the Martin Company has the utility function
An investment advisor currently has two types of investments available for clients: a conservative investment A that pays 8% per year and investment B of higher
risk that pays 14%. Clients may divide their investments between the two to achieve any total return desired between 8% and 14%. However, the higher the desired return,
the higher the risk. How should each client listed in the table invest to achieve the desired return?
Client 1 Client 2 Client 3 k
$21000 $40000 $31000 k,
Annual Return Desired $2460 $3860 $3740 k2
Total Investment
How much money should Client 1 invest in each account to achieved the desired return?
Amount in investment A:
Amount in investment B:
How much money should Client 2 invest in each account to achieved the desired return?
Amount in investment A:
Amount in investment B:
How much money should Client 3 invest in each account to achieved the desired return?
Amount in investment A:
Amount in investment B:
Hh2.
Chapter 22 Solutions
CONNECT WITH LEARNSMART FOR BODIE: ESSE
Ch. 22 - Prob. 1PSCh. 22 - Prob. 1CPCh. 22 - Your client says, “With the unrealized gains in my...Ch. 22 - The aspect least likely to be included in the...Ch. 22 - Prob. 4CPCh. 22 - Prob. 5CPCh. 22 - Prob. 6CPCh. 22 - Which of the following statements reflects the...Ch. 22 - Prob. 8CPCh. 22 - Prob. 9CP
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