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Liam is 28 years old and saving toward his retirement in 35 years. In his...

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Finance

Liam is 28 years old and saving toward his retirement in 35 years. In his RRSP he owns 1,000 shares of Royal Bank of Canada valued at $98 each and $125,000 principal value of 4.5% Government of Canada 20-year bonds. The bonds trade at a premium of 30%. Liam wishes to sell his investments and purchase a mutual fund.

Part A: What is Liams asset allocation? Is it appropriate, and why?

Part B: Risk of Royal bank stock to which Liam's portfolio is exposed to? Risk of GOC bonds that Liam's portfolio is exposed to?

Part C: What type of mutual fund should Liam purchase in order to most closely match his current portfolio? Please explain. Identify one advantage and one disadvantage if Liam swaps his stocks and bonds for a mutual fund.

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