Project on portfolios and cash flows

Apr 25th, 2014
FratBro23
Category:
Business & Finance
Price: $40 USD

Question description

$10,000 is 

invested in a single asset that returns 7 percent annually for 

twenty-five years and $2,000 is placed in five different 

investments, earning returns of 100 percent, 0 percent, 5 percent, 

10 percent, and 12 percent, respectively, over the twenty-year 

time frame. For each of the questions below, begin with the 

original scenario presented in the table: 

a. Experiment with the return on the fifth asset. How low can the 

return go and still have the diversified portfolio earn a higher 

return than the single-asset portfolio? 

b. What happens to the value of the diversified portfolio if the 

first two investments are both a total loss? 

c. Suppose the single-asset portfolio earns a return of 8 percent 

annually. How does the return of the single-asset portfolio 


d. Assume that Asset 1 of the diversified portfolio remains a 

total loss (–100% return) and asset two earns no return. 

Make a table showing how sensitive the portfolio returns are 

to a 1-percentage-point change in the return of each of the 

other three assets. That is, how is the diversified portfolio’s 

value affected if the return on asset three is 4 percent or 6 

percent? If the return on asset four is 9 percent or 11 

percent? If the return on asset five is 11 percent? 13 percent? 

How does the total portfolio value change if each of the three 

asset’s returns are one percentage point lower than in the 

table? If they are one percentage point higher? 

e. Using the sensitivity analysis of (c) and (d), explain how the 

two portfolios differ in their sensitivity to different returns on 

their assets. What are the implications of this for choosing 

between a single asset portfolio and a diversified portfolio? 


fn2640_project (1).xlsx 


Tutor Answer

(Top Tutor) Daniel C.
(997)
School: UT Austin
PREMIUM TUTOR

Studypool has helped 1,244,100 students

8 Reviews


Summary
Quality
Communication
On Time
Value
ddg82
Dec 9th, 2016
" Thanks, good work "
tinytim47
Nov 25th, 2016
" Wow this is really good.... didn't expect it. Sweet!!!! "
kenmwao2
Nov 24th, 2016
" Solid work, thanks. "
jestin7
Nov 16th, 2016
" This tutor is great! "
lilmoe415
Nov 3rd, 2016
" Thank you, Thank you, for top quality work, this is your guy!! "
dontuwannaknow
Oct 11th, 2016
" Excellent work as always thanks so much "
thargrow
Oct 2nd, 2016
" Very Satisfied. "
SjSurvivor143
Sep 28th, 2016
" Thanks for the help. "
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1826 tutors are online

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors