An investment adviser has decided to purchase a few alternative investments, some stocks, and five bonds...

An investment adviser has decided to purchase a few alternative investments, some stocks, and five bonds with equal amounts invested in each of these three categories. This decision reflects which part of the investment process?

Security selection

Asset allocation

Investment analysis

Portfolio analysis

______ management is best applied when an investor believes that markets are inefficient.

Independent

Passive

Active

Behavioral

Solutions

Expert Solution

It is asset allocation stage.

Asset allocation is the implementation of an investment strategy . Security selection is the process of choosing specific securities within a given asset class that meet screening qualifications.Investment analysis means the process of judging an investment for income.Portfolio analysis is the disciplined process of reviewing portfolio holdings, both individually and in aggregate, for appropriateness and to reduce risks.

From above definitions its clear that it cant be portfolio analysis and investment analysis.

Its is asset allocation because he has decided which assets to invest in. He hasnt gone one step ahead and chosen which specific stocks that he need to buy or which Five bonds to invest in. Therefore, it is not security selection.

Passive management is best applied when an investor believes that markets are inefficient. As it involves less buying and selling and calculated move

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Scenario 5 A company has a portfolio of investments in stocks and in bonds. The total...

Scenario 5 A company has a portfolio of investments in stocks and in bonds. The total investment is $8 million of which $2 million is invested in stocks. (Go to four decimals as needed.) Stocks Bonds Portfolio Weight a b Expected/Mean Return 9.25% 6.55% Variance 328.1875 61.9475 Covariance -135.3375 What is the portfolio weight for the bonds? Question 22 Refer to Scenario 5. What is the expected portfolio return? Calculate as a percentage. Question 23 Refer to Scenario 5. What...

Real estate investment is a type of alternative investments. An analyst has collected the following expected...

Real estate investment is a type of alternative investments. An analyst has collected the following expected cash flows about a project: Year Cash Flows 1 $10,000 2 25,000 3 50,000 4 35,000 The initial cost is $85,000. The discount rate is 8.125 percent. What is the investment's present value? a. $13,700 b. $18,200 c. $12,400 d. $16,118 e. None of above

In general, there are five major investment assets such stocks, bonds, commodities (e.g. oil, gold, silver,...

In general, there are five major investment assets such stocks, bonds, commodities (e.g. oil, gold, silver, corn, sugar, coffee, etc.), real estate (e.g. houses, buildings, etc.), and cash or cash equivalent. On the U.S. Treasury yield curve just inverted for the first time in more than a decade. The spread between 3- and 5-year yields fell to negative 1.4 basis points on that day, dropping below zero for the first time since. Suppose that you have been retained by Fidelity...

(Value of Investment) Your real estate adviser has come back with some revised forecasts. He suggests...

(Value of Investment) Your real estate adviser has come back with some revised forecasts. He suggests that you rent out the building for two years at $30,000 a year, and predicts that at the end of that time you will be able to sell the building for $840,000. Thus there are now two future cash flows—a cash flow of C1 = $30,000 at the end of one year and a further cash flow of C2 = (30,000+840,000) = $870,000 at...

Jay is reviewing his portfolio of investments, which include certain stocks and bonds. He has a...

Jay is reviewing his portfolio of investments, which include certain stocks and bonds. He has a large amount tied up in U.S. Treasury bills paying 2.9% . He is considering moving some of his funds from the T-bills into a stock. The stock has a beta of 1.21. If Jay expects a return of 14.3% from the stock (a little better than the current market return of 12.1%), should he buy the stock or leave his funds in the T-bill?

Payback Period and NPV of Alternative Automobile Purchase Wendy Li decided to purchase a new Honda...

Payback Period and NPV of Alternative Automobile Purchase Wendy Li decided to purchase a new Honda Civic. Being concerned about environmental issues she is leaning toward a Honda Civic Hybrid rather than the completely gasoline-powered LX model. Nevertheless, she wants to determine if there is an economic justification for purchasing the Hybrid, which costs $3,700 more than the LX. Based on a mix of city and highway driving she predicts that the average gas mileage of each car is 40...

What are the basic principles in valuing and/or pricing investments, such as stocks and bonds? Generally...

What are the basic principles in valuing and/or pricing investments, such as stocks and bonds? Generally speaking, what role do interest rates (level maturity, etc.) play in pricing investments?

The average rate of return on investments in large stocks has outpaced that on investments in...

The average rate of return on investments in large stocks has outpaced that on investments in Treasury bills by about 7% since 1926. Why, then, does anyone invest in Treasury bills?

A local real estate investor in Orlando is considering five alternative investments: a day spa, a...

A local real estate investor in Orlando is considering five alternative investments: a day spa, a theater, a restaurant, a motel, or a gift shop. Profits from the day spa, theater, gift shop or restaurant will be affected by the cost of gasoline; profits from the restaurant will be relatively stable under any condition. The following payoff table shows the profit or loss that could result from each investment. Determine the best investment using the minimax regret decision criterion. Gasoline...

Maria has about $200,000 to invest for 5 years. Given her current investments, her adviser has...

Maria has about $200,000 to invest for 5 years. Given her current investments, her adviser has recommended that she invest the money in corporate bonds. Her adviser has suggested two alternatives. Alternative 1 is $200,000 face value of bonds with quarterly coupon payments and a coupon rate of 8% APR compounded quarterly. These bonds were issued five years ago and have exactly five years remaining. They are selling at a price that implies a yield to maturity of 7.90% APR...

Subjects