Question
A balanced portfolio invests in global equities and bonds. The following valuation data is provided: holding asset class valuation as of end of month 1
A balanced portfolio invests in global equities and bonds. The following valuation data is provided:
holding | asset class | valuation as of end of month 1 | valuation as of end of month 2 |
A | Equity | 1000 | 1280 |
B | Equity | 2000 | 1930 |
C | Bonds | 1500 | 1520 |
D | Bonds | 1800 | 1840 |
Cash | Cash | 300 | 145 |
Note that the increase in valuation of A is due to 1) market performance and 2) a purchase with a transaction value of 200 already including transaction fees.
The cash balance at the end of month 2 is the result of the cash balance at the beginning of the month, a cash inflow of 50 (new subscriptions), a management fee of 5, the additional purchase of A (see above) and interest income.
Assume that all transactions occur at the end of the month, i.e., shortly before the end of month 2. The portfolio is benchmarked against a 30/70 (equity/bonds) benchmark with equities earning a return
of 50 bps and bonds a return of 1.6%.
a) Determine the total portfolio valuations at t=1 and t=2.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started