You have recently been hired as a fund manager in the portfolio management team of a...
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You have recently been hired as a fund manager in the portfolio management team of a bank. Your Director, John Tan has arranged a meeting next week to present an investment proposal to a prospective client, Ghislaine Connors. Ms Connors, 70 years old, is interested to invest $1 million in an investment portfolio with your bank. However, she is risk-averse and new to investment products. John suggests that Ghislaine's portfolio should comprise both equity and bonds. He has identified a blue-chip stock of Boss Bank (BB) and a "AAA" S&P rated corporate bond of Superman Ltd (SM). Risk-free rate is given at 1.71% on a 30-year SGS Infrastructure Bond. Based on the bank's research team, the following table shows the annual returns (%) over the last 5 years for Boss Bank and Superman Ltd Bond: (a) (b) Year 2016 2017 2018 2019 2020 Returns on BB Stock (%) -6.29 -9.31 22.91 7.67 15.84 Returns on SM Bond (%) 8.23 -6.00 2.71 19.69 -5.25 Compare the risk-reward profiles of investing in stock and corporate bond. Would this risk-reward profile be the same for mutual funds? According to the given table, appraise the performance of Boss Bank (BB) Stock and Superman Ltd (SM) Bond. Taking into consideration the risk profile of the investor, you are to judge from financial industry standpoint, which return would be most appropriate to assess the performance of the portfolio? You have recently been hired as a fund manager in the portfolio management team of a bank. Your Director, John Tan has arranged a meeting next week to present an investment proposal to a prospective client, Ghislaine Connors. Ms Connors, 70 years old, is interested to invest $1 million in an investment portfolio with your bank. However, she is risk-averse and new to investment products. John suggests that Ghislaine's portfolio should comprise both equity and bonds. He has identified a blue-chip stock of Boss Bank (BB) and a "AAA" S&P rated corporate bond of Superman Ltd (SM). Risk-free rate is given at 1.71% on a 30-year SGS Infrastructure Bond. Based on the bank's research team, the following table shows the annual returns (%) over the last 5 years for Boss Bank and Superman Ltd Bond: (a) (b) Year 2016 2017 2018 2019 2020 Returns on BB Stock (%) -6.29 -9.31 22.91 7.67 15.84 Returns on SM Bond (%) 8.23 -6.00 2.71 19.69 -5.25 Compare the risk-reward profiles of investing in stock and corporate bond. Would this risk-reward profile be the same for mutual funds? According to the given table, appraise the performance of Boss Bank (BB) Stock and Superman Ltd (SM) Bond. Taking into consideration the risk profile of the investor, you are to judge from financial industry standpoint, which return would be most appropriate to assess the performance of the portfolio?
Expert Answer:
Answer rating: 100% (QA)
a Year BB stock X XM XM 2 SM bondY YM YM 2 2016 629 1245 15510 823 4354 1896 2017 931 1547 23944 6 9... View the full answer
Related Book For
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
Posted Date:
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