You have $100,000 to invest over three types of investmentvehicles: bonds, a stock index fund,...

You have $100,000 to invest over three types of investment vehicles: bonds, a stock index fund, and gold. The current bond yield is 3%, the index fund is projecting a 12% return, and gold is projecting an 8% return. To play it safe, you want to keep no more than $30,000 in the index fund and at least four times as much in bonds as in gold. If the projected returns are accurate, how much should you allocate to each investment vehicle in order to maximize your return? Please answer this using excel solver.

Solutions

Expert Solution

Follow below steps to compute allocation to each investment in order to maximise return using excel solver.

1. Setup table as shown below ( allocate any amount to investments but Total sum must be equal to $100,000)

Cell reference -

2. Go to Data---Solver, set solver parameters as shown below and then click on solve to get answer.

3. Answer

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

We have $1000 to invest, and three possible investments - a stock index fund, a bond...

We have $1000 to invest, and three possible investments - a stock index fund, a bond index fund, and a money market.. Average returns on the stock index fund, the bond index fund, and the money market fund are 8%, 5%, and 2% respectively. Total investment in the stock index fund and the bond index fund should not exceed 80% of available funds. Total investments in the bond index fund and the money market fund should be at least 30%...

Analyzing a Portfolio You have $100,000 to invest in a portfolio containing Stock X and Stock...

Analyzing a Portfolio You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 12.7 percent. If Stock X has an expected return of 11.4 percent and a beta of 1.25 and Stock Y has an expected return of 8.68 percent and a beta of .85, how much money will you invest in Stock Y? How do you interpret your answer? What is the...

a) You have $100,000 that you would like to invest. You have three investment choices: Savings...

a) You have $100,000 that you would like to invest. You have three investment choices: Savings Account A which earns 6% APR compounded annually, Savings Account B which earns 5.8% APR compounded monthly, or Savings Account C which earns 5.9% APR compounded quarterly. Which account should you choose? a) Savings Account A b) Savings Account B c) Savings Account C b)Which of the following is an example of the so called `agency problem' or `agency costs' in a large corporation: ...

Suppose you want to invest in a portfolio comprising an index fund that reproduces the...

Suppose you want to invest in a portfolio comprising an index fund that reproduces the market portfolio (such as the S&P/TSX composite index) and also T-bills. Your investment budget is $10,000. The market index has an expected return of 16% and standard deviation of 12%, and the return on T-bills is 4%. Your goal is to get an expected return of 14% on the combined portfolio (Index fund and T-bills). How much do you need to invest in the...

1. Assume you have AUD 100,000 that you must invest in a stock on 2nd January...

1. Assume you have AUD 100,000 that you must invest in a stock on 2nd January 2020. Select a stock from the data provided to invest. Justify your selection. (5 points) Data: daily stock price, beta and some fundamental indicators (EPS, DPS, D/E Ratio) Assessment criteria: o Basis and reasons for selecting the stock based on fundamental analyses. Qualitative analyses will be considered provided the arguments are rigorous and convincing. o Full details of investment in a table format with...

You are an investment advisor for a client with $100,000 to invest in the stock of...

You are an investment advisor for a client with $100,000 to invest in the stock of publicly traded companies. Your client-who has just enough accounting knowledge to be dangerous-has asked you to justify your advice based on the financial statements of the companies you recommend. Your challenge is to: 1) Determine what specific information from each financial statement could best help you make your choice (possibilities include earnings, cash reserves, stock repurchases,level of debt, dividend payments, finacial ratios, etc. 2)...

You have $100,000 and want to invest in stock market. Explain the composition of your potential...

You have $100,000 and want to invest in stock market. Explain the composition of your potential portfolio.

Suppose you invest $100,000 in a mutual fund for 10 years. The fund earns 6% pretax...

Suppose you invest $100,000 in a mutual fund for 10 years. The fund earns 6% pretax per year, makes no annual distributions (and thus there is no income to be taxed each year) and you sell the fund at the end of the 10 years. You pay a 20% tax on capital gains and a 40% tax on ordinary income. What is the pre-tax total dollar accumulation at the end of 10 years? What is the after-tax total dollar accumulation at...

You have just inherited $100,000 tax free. You have three options. Invest in a savings account...

You have just inherited $100,000 tax free. You have three options. Invest in a savings account at your local bank at 1% annual return. Invest the the S&P 500 with an anticipated return of 12% annual return, though there is always some risk as the past is not always an indication of the future.. Invest in your business with an anticipated return of 24%, but with moderate risk due to the changing business environment. Which option would you pursue and...

Suppose you invest $15,000 in an S&P 500 Index fund (S&P fund) and $10,000 in a...

Suppose you invest $15,000 in an S&P 500 Index fund (S&P fund) and $10,000 in a total bond market fund (Bond fund). The expected returns of the S&P and Bond funds are 8% and 4%, respectively. The standard deviations of the S&P and Bond funds are 18% and 7% respectively. The correlation between the two funds is 0.40. The risk-free rate is 2%. What is the expected return on your portfolio? What is the standard deviation on your portfolio? What...

Subjects