Question
In: Statistics and Probability
Innis Investments manages funds for a number of companies and wealthy clients. The investment strategy is...
Innis Investments manages funds for a number of companies and wealthy clients. The investment strategy is tailored to each client's needs. For a new client, Innis has been authorized to invest up to $1.3 million in two investment funds: a stock fund and a money market fund. Each unit of the stock fund costs $50 and provides an annual rate of return of 10%; each unit of the money market fund costs $100 and provides an annual rate of return of 4%.
The client wants to minimize risk subject to the requirement that the annual income from the investment be at least $67,000. According to Innis' risk measurement system, each unit invested in the stock fund has a risk index of 13, and each unit invested in the money market fund has a risk index of 5; the higher risk index associated with the stock fund simply indicates that it is the riskier investment. Innis's client also specified that at least $750,000 be invested in the money market fund.
(a)
Determine how many units of each fund Innis should purchase for the client to minimize the total risk index for the portfolio. (Assume S is the number of units purchased in the stock fund and M is the number of units purchased in the money market fund.)
(S, M) =
Solutions
orchestra answered 1 year agoRelated Solutions
Innis Investments manages funds for a number of companies and wealthy clients. The investment strategy is...
Innis Investments manages funds for a number of companies and
wealthy clients. The investment strategy is tailored to each
client’s needs. For a new client, Innis has been authorized to
invest up to $1.2 million in two investment funds: a stock fund and
a money market fund. Each unit of the stock fund costs $50 and
provides an annual rate of return of 10%; each unit of the money
market fund costs $100 and provides an annual rate of return...
Question 1 A Innis Investments manages funds for a number of companies and wealthy clients. The...
Question 1 A
Innis Investments manages funds for a number of companies and
wealthy clients. The investment
strategy is tailored to each client’s needs. For a new client,
Innis has been authorized to invest up to $1.2
million in two investment funds: a stock fund and a money market
fund. Each unit of the stock fund
costs $50 and provides an annual rate of return of 10%; each unit
of the money market fund costs $100
and provides an annual...
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more than $120 million in funds for its numerous clients. The
company uses an asset allocation model that recommends the portion
of each client's portfolio to be invested in a growth stock fund,
an income fund, and a money market fund. To maintain diversity in
each client's portfolio, the firm places limits on the percentage
of each portfolio that may be invested in each of the three funds.
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J.D. Williams, Inc., is an investment advisory firm that manages more than $120 million in funds...
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company uses an asset allocation model that recommends the portion
of each client’s portfolio to be invested in a growth stock fund,
an income fund, and a money market fund. To maintain diversity in
each client’s portfolio, the firm places limits on the percentage
of each portfolio that may be invested in each of the three funds.
General guidelines...
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