Determine the amount to invest in stock mutual funds based on the remaining money and the appropriate risk factors for Solution Question 3 & Explain how cell D18 was obtained.

4.5% None 1 Portfolio Allocation Model 2 Life Insurance 2500 5000 -0.6 3 Data Bond mutual funds 6.0% 30000 None 1.9 4 Annual Risk factor Stock mutual funds (14.0% 15000 None 2.2 5 Investment return Minimum Maximum per dollar Savings Account 4.0% Nonel -0.3 6 Life Insurance 4.5% $2,500.00 $5,000.00 -0.6 7 Bond mutual funds 6.0% $30,000.00 none 1.9 8 Stock mutual funds 14.0% $15,000.00 none 2.2 Some possible best solutions to try are listed below. Invest the minimum amount in life insurance, bond mutual funds, and stock mutual funds, and invest everything else in the savings account. 9 Savings Account 4.0% none none -0.3 Solution 1 Invest the maximum possible in life insurance, the minimum possible in bond and stock mutual funds, and invest everything else in the 10 Total amount available $100,000 Limit 100,000 Solution 2 savings account. Invest the maximum in life insurance and the minimum in bond mutual funds. Determine the amount to invest in stock mutual funds based on the remaining money and the appropriate risk factors. Invest everything else in the savings account. 11 Solution 3 12 Model Solution 4 Invest the maximum in life insurance and the minimum in bond mutual funds. Invest 13 Solution 1 Solution 2 Solution 3 Solution 4 $28,000.00 in the stock mutual funds and $37,000.00 in the savings account 14 Amount Amount Amount Amount 15 invested invested invested invested 16 Life Insurance $2,500.00 $5,000.00 $5,000.00 $5,000.00 17 Bond mutual funds $30,000.00 $30,000.00 $30,000.00 $30,000.00 Note: for Solution, use What-if Analysis by setting the value of Total weighted risk to 100000, by changing the D18 cell 18 Stock mutual funds $15,000.00 $15,000.00 $26,200.00 $28,000.00 19 Savings Account $52,500.00 $50,000.00 $38,800.00 $37,000.00 20 The answer is Solution 3 21 Total amount invested $100,000.00 $100,000.00 $100,000.00 $100,000.00 22 Total weighted risk 72,750.00 72,000.00 100,000.00 104,500.00 23 24 Total expected return $6,112.50 $6,125.00 $7,245.00 $7,425.00