Vishal123180
01.08.2021 •
Mathematics
Blair & Rosen (B&R) plc is a U.K. based brokerage firm that specializes In building investment portfolios designed to meet the specific needs of its clients who are mostly private investors willing to invest their r savings in stocks and shares. One client who contacted B&R recently has a maximum of $500,000 to invest. The company`s investment advisor has decided to recommend the portfolio consisting of two investment funds: An internet fund where the companies are all active in internet businesses of one kind or another and the blue-chip fund which is more conservative and traditional. The internet fund has a projected annual return over the next few years of 12 %, while the blue-chip fund has a projected annual return of 9%. The investment advisor has decided that at most, $350,000 of the client`s funds should be invested in the internet fund. B&R services include risk rating for each investment alternative. The internet fund which is more risky of the two alternatives has a risk rating of 6 for every thousand dollar invested while the blue-chip fund has a risk rating of 4 per thousand dollar invested. So, for example, if $10000 is invested in each of the two investments funds, B&R risk rating for the portfolio would be 6(10) + 4(10)= 100. Finally B&R has developed a questionnaire to measure each client`s risk tolerance. Based on the responses, each client is classified as conservative, moderate or aggressive investor. The questionnaire results have classified the current client as a moderate investor. B&R recommends that a client who`s a moderate investor limit his or her portfolio to a maximum risk rating of 240. You have been asked to help the B&R investment advisor.
What is the recommended investment portfolio for this client?
What is the annual return for the portfolio?
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Ответ:
a) The Investment portfolio consisting of the internet fund and Blue chip fund would be the recommended Portfolio for a moderate risk investor
b) The annual return for the portfolio is = $5100 ( Calculated using the excel formula sheet attached below )
The best/recommended investment portfolio for this client is the Investment portfolio consisting of the internet fund and Blue chip Fund because the Portfolio consists of a lower risk rating of 4 for every thousand which is conservative, and also an Internet fund which has a risk rating of 6 for every thousand ( aggressive ). The combination of a high and low risk investment fund in a portfolio results to an average/moderate risk portfolio.
Calculating the Annual return for the portfolio ( using the excel sheet below)
Model Internet fund Blue chip fund
Amount to invest 20 30
Total amount invested = 20 + 30 = 50
Total risk rating = 240
Total return = 5.1
hence: The recommended investment portfolio for this client is the Blue chip fund and the total return on the portfolio = $5100 applying the excel formulae attached below
Internet Fund = $20,000
Blue chip fund = $30,000
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