60.1K

Verified Solution

Link Copied!

An investor has $150,000 to invest in four assets. The expected annual returns, minimum and maximum amounts with which the investor will be comfortable allocating to each investment, and risk factors are shown in the accompanying table. Assume that the investor will tolerate a weighted risk per dollar invested of at most 1.0. Experiment with the accompanying portfolio allocation model by testing each of the possible best solutions, included, to attempt to find the best solution that maximizes the expected annual return and meets the total weighted risk constraint. Click here to view the portfolio allocation model. Click here to view the returns, minimums, maximums, and risk factors. Click here to view some possible best solutions. in bond mutual funds, $ in stock mutual funds, and $ in savings accounts, for a total expected return of $ The best solution is to invest $ in life insurance, $ (Round to the nearest cent as needed.) Investment Life Insurance Bond mutual funds Stock mutual funds Savings Account Annual Return 4.0% 6.0% 11.0% 3.0% Minimum $3,750.00 $45,000.00 $22,500.00 None Risk Factor per Maximum Dollar Invested $7,500.00 -0.6 None 1.9 None 2.2 None -0.2 Portfolio Allocation Modell Data Annual return 5.0% 7.0% 11.0% 4.0% $100,000 Investment Life Insurance Bond mutual funds Stock mutual funds Savings Account Total amount available Minimum $2,500.00 $30,000.00 $15,000.00 none Maximum $5,000.00 none Risk factor per dollar -0.5 1.8 2.1 -0.3 100,000 none none Limit Model Life Insurance Bond mutual funds Stock mutual funds Savings Account Amount invested $5,000.00 $50,000.00 $15,000.00 $30,000.00 Total amount invested $100,000.00 Total weighted risk 110,000.00 Total expected return $6,600.00 An investor has $150,000 to invest in four assets. The expected annual returns, minimum and maximum amounts with which the investor will be comfortable allocating to each investment, and risk factors are shown in the accompanying table. Assume that the investor will tolerate a weighted risk per dollar invested of at most 1.0. Experiment with the accompanying portfolio allocation model by testing each of the possible best solutions, included, to attempt to find the best solution that maximizes the expected annual return and meets the total weighted risk constraint. Click here to view the portfolio allocation model. Click here to view the returns, minimums, maximums, and risk factors. Click here to view some possible best solutions. in bond mutual funds, $ in stock mutual funds, and $ in savings accounts, for a total expected return of $ The best solution is to invest $ in life insurance, $ (Round to the nearest cent as needed.) Investment Life Insurance Bond mutual funds Stock mutual funds Savings Account Annual Return 4.0% 6.0% 11.0% 3.0% Minimum $3,750.00 $45,000.00 $22,500.00 None Risk Factor per Maximum Dollar Invested $7,500.00 -0.6 None 1.9 None 2.2 None -0.2 Portfolio Allocation Modell Data Annual return 5.0% 7.0% 11.0% 4.0% $100,000 Investment Life Insurance Bond mutual funds Stock mutual funds Savings Account Total amount available Minimum $2,500.00 $30,000.00 $15,000.00 none Maximum $5,000.00 none Risk factor per dollar -0.5 1.8 2.1 -0.3 100,000 none none Limit Model Life Insurance Bond mutual funds Stock mutual funds Savings Account Amount invested $5,000.00 $50,000.00 $15,000.00 $30,000.00 Total amount invested $100,000.00 Total weighted risk 110,000.00 Total expected return $6,600.00

Answer & Explanation Solved by verified expert

See Answer