What is the total risk and total return, Financial Accounting

Assignment Help:

Financials Investments, a group of financial advisors and retirement planners, has been requested to provide advice on how to invest $200,000 for one of its clients. The client has stipulated that the money must be put into either stocks fund or a money market fund, and the annual return should be at least $14,000. Other conditions related to risk have also been specified, and the following linear program was developed to help with this investment decision:

Minimize Risk = 12S + 5M

Subject to:

                             S + M = 200,000 (total invest is $200,000)

               0.10S + 0.05M ≥ 14,000 (return must be at least $14,000)

                                    M ≥ 40,000 (at least $40,000 must be in money market)

                                 S, M ≥0

Where

S = dollars invested in stock fund

M = dollars invested in money market fund

1) Solve this problem graphically (As done in the class).

2) Then set it up in Excel and solve it.

3) Email the excel model which has the sum product formula to the instructor.

a)       How much money should be invested in stock fund and in money market fund?

b)       What is the Total Risk?

c)       What is the total return? What rate of return is this?

d)      Would solution change if risk measure for each dollar in the stock fund were 14 instead of 12?

e)       For each additional dollar that is available, how much does the risk change?

f)        Would solution change if the amount that must be invested in the money market fund were changed from $40,000 to $50,000?


Related Discussions:- What is the total risk and total return

How accounting objectives can be achieved, How Accounting objectives can be...

How Accounting objectives can be achieved There are two main ways by which this can be achieved: All the accounting records are maintained at the head office; or Each

Grounds for compulsory winding up-liquidation of companies, Grounds for com...

Grounds for compulsory winding up A company may be wound up by the court under s.219 if: 1) The company so resolves by special resolution, 2) Default is made in delivering th

Determine the wacc, The capital structure of Wild West Inc. is as follows: ...

The capital structure of Wild West Inc. is as follows: -     Debts: $5,000,000 (face value) bonds with coupon rate at 8.00% and current price at par -      Preferred shares:

Solutions, I see a question posted. I can I be sure the problem has been s...

I see a question posted. I can I be sure the problem has been solved. I tried calling your number but I got no answer

Partnership, in the absence of no agreement in partnership discuss and expl...

in the absence of no agreement in partnership discuss and explain the provision of partnership act

Example on financial and managerial accounting, Mr N. M. is lucky to have a...

Mr N. M. is lucky to have a lottery prize of Rs 20 million. He does not have any liability and does not have any claimant over this money. He has the following alternatives: (i)

Liquidation of the company, The balance sheet of Marilyn and Monroe was as ...

The balance sheet of Marilyn and Monroe was as follows immediately prior to the partnership's being liquidated: cash, $25,426; other assets, $130,439; liabilities, $22,198; Marilyn

Format of the balance sheet, Format of the Balance Sheet It shows the f...

Format of the Balance Sheet It shows the financial position of the company as at the end of a given financial period. The standard requires that assets and liabilities should b

Total cost at each breakeven, Q. The British Mini car was designed by ...

Q. The British Mini car was designed by a team headed by Sir Alec Issigonis in the late 1950's. Describe the process of the design of this product. Consider the context of

What should be the basic earnings per share, Information concerning the cap...

Information concerning the capital structure of Piper Corporation is as follows: December 31, 2011 2010 Common stock 150,000 shares 150,000 shares Convertible preferred stock 15,00

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd