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Please submit your Unit #8 Writing Assignment in MS Word format with the following file name: LastNameFirstInitial_Unit 08_WritingAssignment.docx. For example, if you name is John Smith, the file name of your Answer Sheet should be SmithJ_Unit08_Writing Assignment.docx.

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NAME: _____________________________________

Robert and April Johnson have come to you with a portfolio of invesments that seem to be a mixture of past adviser’s uncoordinated recommendations. One positive is that some of the funds seem to be doing well, another is that all the funds are tax-deferred acounts held for specific purposes, and a third is that the Johnsons seem to be able to meet their goals. So your job is not so much financial planning as investment planning. Table 1.0 contains data on what the clients have brought to you.

Robert and April have only two goals: the college education of their twins in six years and their retirement in 20 years. Ignore the amounts necessary to achieve their objectives. Assume that the allocation of their current funds is equal in ech accunt. Also assume the amount in the Education Savings Account is enough to fund their education goal. Assume that their current savings rate plus their 401(k) is just sufficient to meet their retirement goal with a high level of condifence. Your assignment is as follows:

Evaluate the current investments of Robert and April. Make recommendations as to the viability and apropriateness of their current investments (for example, risk level, time horizon, and investment objectives.)

Is the overall portfolio sufficiently differsified?

Determine if the current invesments should be kept. Should one or more investments be sold. If so which ones?

Decide which funds should be in the Retirement Portfolio and which should be in the Education Savings Account portfolio and construct two target portfolios that match their specific goals and have the best return prospects.

Robert and April are not well educated about investing. Provide support for your your recommendations. Write your recommendations in a way that educates and explains portfolio risk and return to the Johnsons.

Fund

Class

Portfolio

Current

Allocation

Beta

(to S &P)

Sharpe Ratio

Treynor Ratio

Jensen’s Alpha

1

Domestic growth

401(k)

16.7%

1.1

0.773

15.455

1.5%

2

Global growth

401(k)

16.7%

0.8

0.625

18.75

0.3%

3

Balanced

401(k)

16.7%

0.6

0.667

16.667

-0.4%

4

U.S. bonds, mixed grade

Education Savings Account

16.7%

3.6 years’ duration

NMF

NMF

+1% (to bonds index

5

S & P 500 index

Education Savings Account

16.7%

1.0

0.770

17.0

-.10%

6

Equity income

Education Savings Account

16.7%

0.8

1.06

21.25

3.0%


*MNF – No Meaningful Figure.

Tutor Answer

textsformoney
School: Cornell University

Thank you please.

Running Head: Funds Evaluation and Analysis.

1

Funds Evaluation and Analysis:
Student’s Name:
Course Title:
University Affiliation:
Date:

Funds Evaluation and Analysis.

2

1
Time horizon-The first three coming in class domestic growth, global growth and
balanced are planned for 20 years. The second three that is coming in class US bonds and P 500
list and value wages are anticipated to be liquated for instructive purposes and enthusiasm
following a term of 6 years.
Risk -Risk are considered as of two cases. These two cases are: Risks due to the
fluctuations of the market and the risk due to the fluctuation of securities.
Beta-The beta represents the risks due to fluctuation of market and the differences in
portfolio return to the risk free return of the stock, it gives the fluctuation due to the securities.
That is Beta shows that how much it is volatile with the market.
The Fund 1 is having Beta 1.1 which depicts that it is 10% more volatile than market.
Fund 2 is having Beta 0.8 which means that it is 20% less volatile than market. Fund 3 Beta is
0.6 which means it is 40% less volatile than market. Fund 4 is US bonds which does not have a
relation with market Volatility. Fu...

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