Reference no: EM13729499
You are a portfolio manager for the XYZ investment fund. The objective for the fund is to maximize your portfolio returns from the investments on four alternatives. The investments include (1) stocks, (2) real estate, (3) bonds, and (4) certificate of deposit (CD). Your total investment portfolio is $1,000,000.
Investment Returns
Based on the returns from the past five years, you concluded that the investment annual returns on stocks are 10%, on real estate’s are 7% on bonds are 4% and on CD is 1%.
Risk Constraints
However, you also have to analyze the risks associate with each investment category. A wildly used risk measurement parameter is called Value at Risk (VaR). (Note: VaR measures the risk of loss on a specific portfolio of financial assets.) For example, given a million dollar stock investment, if a portfolio of stocks has a one-day 4% VaR, there is a 5% probability that the stock portfolio will fall in value by more than 1,000,000 * 0.004 = $4,000 over a one day period. In the portfolio, the VaR for stock investments is 6%. Similarly, the VaR for real estate investment is 2% and the VaR for bond investment is 1% and the VaR for investment in CD is 0%. To manage the portfolio, you decided that at 5% probability, your VaR for stocks cannot exceed $25,000, VaR for real estate cannot exceed $15,000, VaR for bonds cannot exceed $2,500 and the VaR for CD investment is $0.
Diversification and Liquidity Constraints
As a diversified investment portfolio, you also decided that each investment category must hold at least $50,000 of the total investment assets. In addition, you must hold combined CD and bond investment no less than $200,000 in order to meet liquidity requirement.
The total amount of real estate holding shall not exceed 30% of the portfolio assets.
1. Please identify the objective function. Z=?
2. Identify all constraints in a formula.
|
How will you communicate your message keeping in mind
: How will you communicate your message keeping in mind that you will target not only your actual consumer, but different influencing circles that may impact the purchase of your product
|
|
What will these equal payments be
: Mr. Bill S. Preston, Esq., purchased a new house for $130,000. He paid $30,000 down and agreed to pay the rest over the next 10 years in 10 equal end-of-year payments plus 8 percent compound interest on the unpaid balance. What will these equal payme..
|
|
Temperature apparent safety hazards
: Visit a local fast-food restaurant, such as McDonald's, Wendy's or Taco Bell and order a meal. During your visit, perform a quality and safety analysis of the store including:
|
|
Compound interest with no annual periods
: Compound interest with no annual periods- Calculate the future sum of $3,000, given that it will be held in the bank 7 years at an annual interest rate of 5 percent. Recalculate part (A) using compounding periods that are (1) semi-annual and (2) bimo..
|
|
Investment returns and diversification-liquidity constraints
: You are a portfolio manager for the XYZ investment fund. The objective for the fund is to maximize your portfolio returns from the investments on four alternatives. The investments include (1) stocks, (2) real estate, (3) bonds, and (4) certificate o..
|
|
Develop top managers abroad
: My organization uses expatriates to develop top managers abroad. Expatriates are also used in our organization because they possess more control and apply company policies and culture in accomplishing tasks.
|
|
How did the sociopolitical climate of the time period
: How did the sociopolitical climate of the time period, including especially the First World War, influence artists? As always, your posts need to meet multiple rubrics to get quality-points.
|
|
Case study-porsche
: Read the Porsche case provided in the course materials section and describe the company's history, products, and major competitors in a paragraph or two
|
|
Bonds on the market making annual payments
: Page Enterprises has bonds on the market making annual payments with seven years to maturity, and selling for $950. At this price, the bonds yield 6.00 percent. What must the coupon rate be on the bonds?
|