Assumptions Yearly Inflation Rate: 3% Funds and 10-year returns shown below in table and...
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Assumptions • Yearly Inflation Rate: 3% • Funds and 10-year returns shown below in table and graph format (the 10th year being last year's returns): 1 2 3 4 5 6 7 8 9 10 Crimson 200 Mercury 500 Bonds Blue Harbor 10 20% 15% 10% 5% 0% Hathaway 150 -2% -3% 8% -1% -5% -10% -5% -1% 7% -15% -11% 3% 7% 4% 2% 5% 1% 1% 1% 1% 1% 1% 2% 1% 3 10% Crimson 200 12% 5% 3% 1% 1% 1% 1% 1% 1% -Mercury 500 16% -1% -2% 18% 3% 1% 2% 2% 3% 6% 3% 5% 6% Past 10 Year Returns 5 6% 10% 8% 5% 7% Bonds Blue Harbor 10 2% 7 -Hathaway 150 10 Name: Gwendolyn Hart Education: B.S. Mechanical Engineering, Auroras Institute of Technology Occupation: Sr. Director, Product Development, Mighty Tech "How long ago did we last speak? It seems about 7 years, is that correct? A lot has changed since then. I've since transitioned to Product Development, where I can influence Mighty Tech's product decisions firsthand. It's been a great move with a variety of challenges. Now that I'm a little older, I'm starting to think through what I want to do with the money that I've saved up and how I'd like for it to grow. I currently have $50,000 in my savings account, but it doesn't really get me much in return and certainly does not track with inflation. I'd like to change that. In terms of long-term goals, I'd like for the $50,000 I've saved up to at least track with inflation over the next 20 years. That being said, I'm willing to take some risk to potentially get better returns than inflation. What do you suggest I invest in?" Question #3 (14 pts): What are three diversified investment portfolios that you can suggest to Gwendolyn to help her reach her 20-year goal of potentially getting returns greater than her $50,000 adjusted for inflation? (For this problem, explain to her the investment % mix, the risks, and potential rewards for each portfolio) • For example, you can suggest 99% invested in Crimson 200 and 1% invested in the Hathaway 500 (aka the "YOLO") to potentially get returns greater than inflation, but this might not match her risk/reward profile, so you'll have to explain what risks she'll have to undertake vs the potential returns she could have. For this project, I do not suggest recommending this portfolio, but rather a more diversified set of investments that are less risky and have less potential returns Assumptions • Yearly Inflation Rate: 3% • Funds and 10-year returns shown below in table and graph format (the 10th year being last year's returns): 1 2 3 4 5 6 7 8 9 10 Crimson 200 Mercury 500 Bonds Blue Harbor 10 20% 15% 10% 5% 0% Hathaway 150 -2% -3% 8% -1% -5% -10% -5% -1% 7% -15% -11% 3% 7% 4% 2% 5% 1% 1% 1% 1% 1% 1% 2% 1% 3 10% Crimson 200 12% 5% 3% 1% 1% 1% 1% 1% 1% -Mercury 500 16% -1% -2% 18% 3% 1% 2% 2% 3% 6% 3% 5% 6% Past 10 Year Returns 5 6% 10% 8% 5% 7% Bonds Blue Harbor 10 2% 7 -Hathaway 150 10 Name: Gwendolyn Hart Education: B.S. Mechanical Engineering, Auroras Institute of Technology Occupation: Sr. Director, Product Development, Mighty Tech "How long ago did we last speak? It seems about 7 years, is that correct? A lot has changed since then. I've since transitioned to Product Development, where I can influence Mighty Tech's product decisions firsthand. It's been a great move with a variety of challenges. Now that I'm a little older, I'm starting to think through what I want to do with the money that I've saved up and how I'd like for it to grow. I currently have $50,000 in my savings account, but it doesn't really get me much in return and certainly does not track with inflation. I'd like to change that. In terms of long-term goals, I'd like for the $50,000 I've saved up to at least track with inflation over the next 20 years. That being said, I'm willing to take some risk to potentially get better returns than inflation. What do you suggest I invest in?" Question #3 (14 pts): What are three diversified investment portfolios that you can suggest to Gwendolyn to help her reach her 20-year goal of potentially getting returns greater than her $50,000 adjusted for inflation? (For this problem, explain to her the investment % mix, the risks, and potential rewards for each portfolio) • For example, you can suggest 99% invested in Crimson 200 and 1% invested in the Hathaway 500 (aka the "YOLO") to potentially get returns greater than inflation, but this might not match her risk/reward profile, so you'll have to explain what risks she'll have to undertake vs the potential returns she could have. For this project, I do not suggest recommending this portfolio, but rather a more diversified set of investments that are less risky and have less potential returns
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Answer rating: 100% (QA)
1 Balanced Portfolio Investment Mix 40 Crimson 200 30 Mercury 500 20 Bonds 10 Blue Harb... View the full answer
Related Book For
Intermediate Financial Management
ISBN: 978-1111530266
11th edition
Authors: Eugene F. Brigham, Phillip R. Daves
Posted Date:
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