Mr. Jones has $6,000 to invest in three types of stocks, low-risk, medium-risk, and high-risk. He invests according to three principles. The amount invested in low-risk stocks will be at most $2,000 more than the amount invested in medium-risk stocks. At least $4,000 will be invested in low- and medium-risk stocks. No more than $4,000 will be invested in medium- and high-risk stocks. The expected yields are 6% for low-risk stocks, 7% for medium-risk stocks, and 8% for high-risk stocks. How much money should Mr. Jones invest in each type of stock to maximize his total expected yield? Mr. Jones should invest $ in low-risk stocks, $ CIT in medium-risk stocks, and $ in high-risk stocks.

Mr. Jones has $6,000 to invest in three types of stocks, low-risk, medium-risk, and high-risk. He invests according to three principles. The amount invested in low-risk stocks will be at most $2,000 more than the amount invested in medium-risk stocks. At least $4,000 will be invested in low- and medium-risk stocks. No more than $4,000 will be invested in medium- and high-risk stocks. The expected yields are 6% for low-risk stocks, 7% for medium-risk stocks, and 8% for high-risk stocks. How much money should Mr. Jones invest in each type of stock to maximize his total expected yield? Mr. Jones should invest $ in low-risk stocks, $ CIT in medium-risk stocks, and $ in high-risk stocks.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Analysts' estimates on expected returns from equity investments are based on several factors. These estimations also often include subjective and judgmental factors, because different analysts interpret data in different ways Suppose, based on the earnings consensus of stock analysts, Gregory expects a return of 13.54% from the portfolio with the new weights. Does he think that the required return as compared to expected returns is undervalued, overvalued, or fairly valued? O Undervalued Overvalued O Fairly valued Suppose instead of replacing Atteric Inc.'s stock with Baque Co.'s stock, Gregory considers replacing Atteric Inc.'s stock with the equal dollar allocation to shares of Company X's stock that has a higher beta than Atteric Inc. If everything else remains constant, the required return from the portfolio would increase
A stock broker is required to keep $100,000 in low risk funds. He splits the money between a fund that has an interest rate of 9.2% and one that pays 8.6%. In the first year, the money earns $8960 in interest. How much of the $100,000 was invested in the fund with 9.2% interest? Fill in the blank with your answer.Type a numeric answer only, do not type the $ sign or commas.
15. Investment Planning Mr. Jones has $9000 to invest in three types of stocks: low-risk, medium-risk, and high-risk. He invests according to three principles. The amount invested in low-risk stocks will be at most $1000 more than the amount invested in medium-risk stocks. At least $5000 will be invested in low- and medium-risk stocks. No more than $7000 will be invested in medium- and high-risk stocks. The expected yields are 6% for low-risk stocks, 7% for medium-risk stocks, and 8% for high-risk stocks. How much money should Mr. Jones invest in each type of stock to maximize his total expected yield?
Brandon is an analyst at a wealth management firm. One of his clients holds a $5,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. (AI) 35% 0.750 38.00% Arthur Trust Inc. (AT) 20% 1.500 42.00% Li Corp. (LC) 15% 1.100 45.00% Baque Co. (BC) 30% 0.300 49.00% Brandon calculated the portfolio’s beta as 0.818 and the portfolio’s required return as 8.4990%. Brandon thinks it will be a good idea to reallocate the funds in his client’s portfolio. He recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Baque Co. The risk-free rate is 4%, and the market risk premium is 5.50%. According to Brandon’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change? (Note: Do not round your…
Brandon is an analyst at a wealth management firm. One of his clients holds a $10,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. (AI) 35% 0.750 23.00% Arthur Trust Inc. (AT) 20% 1.500 27.00% Li Corp. (LC) 15% 1.100 30.00% Transfer Fuels Co. (TF) 30% 0.500 34.00% Brandon calculated the portfolio’s beta as 0.8775 and the portfolio’s expected return as 8.83%. Brandon thinks it will be a good idea to reallocate the funds in his client’s portfolio. He recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 4%, and the market risk premium is 5.50%. According to Brandon’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change? (Note: Round your…
Rafael is an analyst at a wealth management firm. One of his clients holds a $10,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. (AI) 35% 0.900 23.00% Arthur Trust Inc. (AT) 20% 1.400 27.00% Li Corp. (LC) 15% 1.100 30.00% Transfer Fuels Co. (TF) 30% 0.300 34.00% Rafael calculated the portfolio’s beta as 0.850 and the portfolio’s required return as 8.6750%. Rafael thinks it will be a good idea to reallocate the funds in his client’s portfolio. He recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 4%, and the market risk premium is 5.50%. According to Rafael’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change? (Note: Do not round…
Andrew is an analyst at a wealth management firm. One of his clients holds a $7,500 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. 35% 0.750 0.38% Arthur Inc. 20% 1.500 0.42% Li Corp. 15% 1.300 0.45% Baque Co. 30% 0.500 0.49% Andrew calculated the portfolio's beta as 0.908 and the portfolio's expected return as 10.90%. Andrew thinks it will be a good idea to reallocate the funds in his client's portfolio. He recommends replacing Atteric Inc.'s shares with the same amount in additional shares of Baque Co. The risk-free rate is 5.00%, and the market risk premium is 6.50%. According to Andrew's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? 0.66% 0.44% 0.71% 0.57% Analysts' estimates on expected returns from equity investments are based on…
You have a new job as a Financial Planning assistant. Your client wants to invest money in stocks, bonds, and treasuries that have the dividend yields shown in the table below. Your job is to allocate their money across these three investments such that the total dollars of stocks is at least $10,000 less than the total dollars in bonds plus treasuries. In addition, they have identified the maximum investment in each of those three investment types (also shown below). Maximize the dividends earned. Your answer will be the amount invested in Stocks (rounded to whole dollars). Use Scenario 3 Stocks: yield % Bonds: yield % Treasuries: yield % Stocks: $ max Bonds: $ max Treasuries: $ max Scenario 1 2.22 2.04 1.93 170,000 60,000 50,000 Scenario 2 1.71 1.98 1.88 400,000 180,000 200,000 Scenario 3. 1.14 3.03 2.08 410,000 300,000 75,000 Scenario 4 1.25 1.48 2.55 800,000 280,000 500,000
Gregory is an analyst at a wealth management firm. One of his clients holds a $7,500 portfolio that consists of four stocks. The investment allocation In the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. (AI) 35% 0.900 53.00% Arthur Trust Inc. (AT) 20% 1.400 57.00% Lobster Supply Corp. (LSC) 15% 1.100 60.00% Transfer Fuels Co. (TF) 30% 0.500 64.00% Gregory calculated the portfolio's beta as 0.910 and the portfolio's required return as 12.8250%. Gregory thinks it will be a good idea to reallocate the funds in his client's portfolio. He recommends replacing Atteric Inc.'s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 6%, and the market risk premium is 7.50%. According to Gregory's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? (Note: Do not round your Intermediate…
Tom had 300 shares of the XYZ Fund on January 1. The shares had a value of GHS23. During the year, he received GHS150 in dividends and GHS450 in capital gains distributions. He used the funds to purchase shares at an average price of GHS25 per share. By the end of the year, the shares were all up to GHS27. What is the percentage of his total return?
You have $19,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 15 percent and Stock Y with an expected return of 10 percent. Assume your goal is to create a portfolio with an expected return of 13.15 percent. How much money will you invest in Stock X and Stock Y? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Investment in Stock X Investment in Stock Y
Brandon is an analyst at a wealth management firm. One of his clients holds a $5,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Atteric Inc. (AI) Arthur Trust Inc. (AT) Li Corp. (LC) Transfer Fuels Co. (TF) Investment Allocation 35% 20% 15% 30% O 1.1069 percentage points 1.1935 percentage points O 0.9625 percentage points O 0.7508 percentage points Beta 0.900 1.500 1.300 0.400 Standard Deviation Brandon calculated the portfolio's beta as 0.930 and the portfolio's required return as 9.1150%. Brandon thinks it will be a good idea to reallocate the funds in his client's portfolio. He recommends replacing Atteric Inc.'s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 4%, and the market risk premium is 5.50%. O Overvalued O Undervalued O Fairly valued 38.00% 42.00% 45.00% 49.00% According to Brandon's recommendation,…

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