Calculate the returns from the investments above

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Assume that you recently graduated with an BBA degree and that you just landed a job as a financial planner with Barney Smith Inc., a large financial services corporation. Your first assignment is to invest sh10,000,000 for a client. The funds are to be invested in a new business that the client plans to start at the end of 1 year so you are to invest the funds for a one year period. Your boss has restricted you to the investment alternatives shown in the table below.

Estimated Returns on Alternative Investments

State of the Economy Probability T-Bills Treasury bonds 2-Stock Portfolio recession 0.1 8.0% -13.0% 3.0%
below average 0.2% 8.0% 1.0% -
average 0.4% 8.0% 15.0% 10.0%
above average 0.2% 8.0% 29.0% -
room 0.1% 8.0% 43.0% 15.0%

a) Calculate the returns from the investments above, advice the client on the best investment alternatives they can pursue.

b) Besides the rates of return, explain to the investor other five issues/factors that an investor should consider before they undertake such investments.

Reference no: EM132615901

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