Jane is 40 years old and has $ 50,000 in her investment account equally spread ....

Jane is 40 years old and has $ 50,000 in her investment account equally spread . And she plans to put in $ 2000 every year in each of the two funds . (15 % of this grade)

Fund A :
1. Current amount : $ 25,000
2. Historical performance , 10 year average : 8.5 %
3. Fund beta : 1.2
4. $2000 added ever year
Fund B :
1. Current amount : $ 25,000
2. Historical performance , 10 year average : 4 .5 %
3. Fund beta : 0.5
4. $2000 added ever year

Using ten year average performance, calculate amount in each fund, and total portfolio at end of 10 years, 20 years and 30 years
Calculate portfolio beta at 10 year, 20 years and 30 years ( Hint : Portfolio beta is weighted average beta . Covered in Std deviation and Beta lectures…. recorded lecture for Beta)

Solutions

Expert Solution

Formulas Used :-

Fund 1 Value after 10 years=FV(C43,10,-$C$40,-C38)
Fund 2 Value after 10 years=FV(C44,10,-$C$40,-C39)
Value of Portfolio after 10 years=C47+C48
Fund 1 Value after 20 years=FV(C43,20,-$C$40,-C38)
Fund 2 Value after 20 years=FV(C44,10,-$C$40,-C39)
Value of portfolio after 20 years=C50+C51
Fund 1 Value after 30 years=FV(C43,30,-$C$40,-C38)
Fund 2 Value after 30 years=FV(C44,30,-$C$40,-C39)
Value of the Portfolio After 30 Years=C53+C54
Portfolio Beta After 10 Years=((C47*$C$41)+(C48*$C$42))/C49
Portfolio Beta After 20 Years=((C50*$C$41)+(C51*$C$42))/C52
Portfolio Beta After 30 Years=((C53*$C$41)+(C54*$C$42))/C55

jeff jeffy answered 1 year ago

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