{ "key_pair_value_system": true, "answer_rating_count": "", "question_feedback_html": { "html_star": "", "html_star_feedback": "" }, "answer_average_rating_value": "", "answer_date_js": "2024-06-09T14:19:12-04:00", "answer_date": "2024-06-09 14:19:12", "is_docs_available": "", "is_excel_available": "", "is_pdf_available": "", "count_file_available": 0, "main_page": "student_question_view", "question_id": "2517140", "url": "\/study-help\/questions\/assignment-2-fin-4305-fall-2019-charles-spurge-a-mathematician-2517140", "question_creation_date_js": "2024-06-09T14:19:12-04:00", "question_creation_date": "Jun 09, 2024 02:19 PM", "meta_title": "[Solved] Assignment 2 Fin 4305 Fall 2019 Charles S | SolutionInn", "meta_description": "Answer of - Assignment 2 Fin 4305 Fall 2019 Charles Spurge, a mathematician with Ansco Petroleum Company, wishes to develop a rati | SolutionInn", "meta_keywords": "assignment,2,fin,4305,fall,2019,charles,spurge,mathematician,ansco,petroleum,company", "question_title_h1": "Assignment 2 Fin 4305 Fall 2019 Charles Spurge, a mathematician with Ansco Petroleum Company, wishes to develop a rational basis for timing his portfolio transactions.", "question_title": "Assignment 2 Fin 4305 Fall 2019 Charles Spurge, a mathematician with Ansco", "question_title_for_js_snippet": "Assignment 2 Fin 4305 Fall 2019 Charles Spurge, a mathematician with Ansco Petroleum Company, wishes to develop a rational basis for timing his portfolio transactions He currently holds a security portfolio with a market value of nearly $100,000, divided equally between a very conservative, low beta common stock, ConCam United, and a highly speculative, high beta stock, Fleck Enterprises Based on his reading of the investments' literature, Charles does not believe it is necessary to diversify one's portfolio across 8 to 15 securities His thinking, based on his independent mathematical analysis, is that one can achieve the same results by holding a two security portfolio in which one security is very conservative and the other is highly speculative His thinking on this point will not be altered He plans to continue to hold such a twosecurity portfolio until he finds that his theory does not work During the past several years, he has earned a rate of return in excess of the risk adjusted, market adjusted rate expected on such a portfolio Charles's current interest centers on possibly developing his own formula plan for timing portfolio transactions The current stage of his analysis focuses on the evaluation of four common formula plans in order to isolate the desirable features of each The plans he is considering are (1) dollar cost averaging, (2) the constant dollar plan, (3) the constant ratio plan, and (4) the variable ratio plan Charles's analysis of the plans will involve two types of data Dollar cost averaging is a passive buy andhold strategy in which the periodic investment is held constant The other plans are more active in that they involve periodic purchases and sales within the port folio Thus, differing data are needed to evaluate the plans For evaluating the dollar cost averaging plan, Charles decided he would assume an investment of $500 at the end of each 45 day period He chose 45 day time intervals to achieve certain brokerage fee savings that would be available by making larger transactions The $500 per 45 days totaled $4,000 for the year and equaled the total amount Charles invested during the past year (Note For convenience, the returns earned on the portions of the $4,000 that remain uninvested during the year are ignored ) In evaluating this plan, he would assume that half ($250) was invested in the conservative stock (ConCam United) and the other half in the speculative stock (Fleck Enterprises) The share prices for each of the stocks at the end of the eight 45 day periods when purchases were to be made are given in the accompanying table Period Concom Price Per Share Fleck Price Per Share 1 22 13 22 13 2 21 88 24 50 3 21 88 25 38 4 22 00 28 50 5 22 25 21 88 6 22 13 19 25 7 22 00 21 50 8 22 25 23 63 To evaluate the three other plans, Charles decided to begin with a $4,000 portfolio evenly split between the two stocks He chose to use $4,000 because that amount would correspond to the total amount invested in the two stocks over one year using dollar cost averaging He planned to use the same eight points in time given earlier to assess the portfolio and make transfers within it if required For each of the plans evaluated using these data, he established the following triggering points Constant dollar plan Each time the speculative portion of the portfolio is worth 13 more or less than its initial value of $2,000, the portfolio is rebalanced to bring the speculative portion back to its initial $2,000 value Constant ratio plan Each time the ratio of the value of the speculative portion of the portfolio to the value of the conservative portion is (1) greater than or equal to 1 15 or (2) less than or equal to 0 84, the portfolio is rebalanced through sale or purchase, respectively, to bring the ratio back to its initial value of 1 0 Variable ratio plan Each time the value of the speculative portion of the portfolio rises above 54 of the total value of the portfolio, its proportion is reduced to 46 Each time the value of the speculative portion of the portfolio drops below 38 of the total value of the portfolio, its proportion is raised to 50 Questions a Under the dollar cost averaging plan, determine the total number of shares purchased, the average cost per share, and the year end portfolio value expressed both in dollars and as a percentage of the amount invested for (1) the conservative stock, (2) the speculative stock, and (3) the total portfolio b Using the constant dollar plan, determine the year end portfolio value expressed both in dollars and as a percentage of the amount initially invested for (1) the conservative portion, (2) the speculative portion, and (3) the total portfolio c Repeat question b for the constant ratio plan Be sure to answer all parts d Repeat question b for the variable ratio plan Be sure to answer all parts e Compare and contrast your results from questions a through d You may want to summarize them in tabular form Which plan would appear to have been most beneficial in timing Charles's portfolio activities during the past year Explain ", "question_description": "

Assignment 2 Fin 4305 Fall 2019 Charles Spurge, a mathematician with Ansco Petroleum Company, wishes to develop a rational basis for timing his portfolio transactions. He currently holds a security portfolio with a market value of nearly $100,000, divided equally between a very conservative, low-beta common stock, ConCam United, and a highly speculative, high-beta stock, Fleck Enterprises. Based on his reading of the investments' literature, Charles does not believe it is necessary to diversify one's portfolio across 8 to 15 securities. His thinking, based on his independent mathematical analysis, is that one can achieve the same results by holding a two-security portfolio in which one security is very conservative and the other is highly speculative. His thinking on this point will not be altered. He plans to continue to hold such a twosecurity portfolio until he finds that his theory does not work. During the past several years, he has earned a rate of return in excess of the risk-adjusted, market-adjusted rate expected on such a portfolio. Charles's current interest centers on possibly developing his own formula plan for timing portfolio transactions. The current stage of his analysis focuses on the evaluation of four common formula plans in order to isolate the desirable features of each. The plans he is considering are (1) dollar-cost averaging, (2) the constant-dollar plan, (3) the constant-ratio plan, and (4) the variable-ratio plan. Charles's analysis of the plans will involve two types of data. Dollar-cost averaging is a passive buy-andhold strategy in which the periodic investment is held constant. The other plans are more active in that they involve periodic purchases and sales within the port-folio. Thus, differing data are needed to evaluate the plans. For evaluating the dollar-cost averaging plan, Charles decided he would assume an investment of $500 at the end of each 45-day period. He chose 45-day time intervals to achieve certain brokerage fee savings that would be available by making larger transactions. The $500 per 45 days totaled $4,000 for the year and equaled the total amount Charles invested during the past year. (Note: For convenience, the returns earned on the portions of the $4,000 that remain uninvested during the year are ignored.) In evaluating this plan, he would assume that half ($250) was invested in the conservative stock (ConCam United) and the other half in the speculative stock (Fleck Enterprises). The share prices for each of the stocks at the end of the eight 45-day periods when purchases were to be made are given in the accompanying table Period Concom Price Per Share Fleck Price Per Share 1 22.13 22.13 2 21.88 24.50 3 21.88 25.38 4 22.00 28.50 5 22.25 21.88 6 22.13 19.25 7 22.00 21.50 8 22.25 23.63 To evaluate the three other plans, Charles decided to begin with a $4,000 portfolio evenly split between the two stocks. He chose to use $4,000 because that amount would correspond to the total amount invested in the two stocks over one year using dollar-cost averaging. He planned to use the same eight points in time given earlier to assess the portfolio and make transfers within it if required. For each of the plans evaluated using these data, he established the following triggering points. Constant-dollar plan. Each time the speculative portion of the portfolio is worth 13% more or less than its initial value of $2,000, the portfolio is rebalanced to bring the speculative portion back to its initial $2,000 value. Constant-ratio plan. Each time the ratio of the value of the speculative portion of the portfolio to the value of the conservative portion is (1) greater than or equal to 1.15 or (2) less than or equal to 0.84, the portfolio is rebalanced through sale or purchase, respectively, to bring the ratio back to its initial value of 1.0. Variable-ratio plan. Each time the value of the speculative portion of the portfolio rises above 54% of the total value of the portfolio, its proportion is reduced to 46%. Each time the value of the speculative portion of the portfolio drops below 38% of the total value of the portfolio, its proportion is raised to 50%. Questions a. Under the dollar-cost averaging plan, determine the total number of shares purchased, the average cost per share, and the year-end portfolio value expressed both in dollars and as a percentage of the amount invested for (1) the conservative stock, (2) the speculative stock, and (3) the total portfolio. b. Using the constant-dollar plan, determine the year-end portfolio value expressed both in dollars and as a percentage of the amount initially invested for (1) the conservative portion, (2) the speculative portion, and (3) the total portfolio. c. Repeat question b for the constant-ratio plan. Be sure to answer all parts. d. Repeat question b for the variable-ratio plan. Be sure to answer all parts. e. Compare and contrast your results from questions a through d. You may want to summarize them in tabular form. Which plan would appear to have been most beneficial in timing Charles's portfolio activities during the past year? Explain.<\/p>", "transcribed_text": "", "related_book": { "title": "Cost Accounting A Managerial Emphasis", "isbn": "978-0133428858, 133428850, 133428702, 978-0133428704", "edition": "15th edition", "authors": "Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan", "cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/301.jpg", "uri": "\/textbooks\/cost-accounting-a-managerial-emphasis-15th-edition-301", "see_more_uri": "" }, "free_related_book": { "isbn": "0631228454", "uri": "\/textbooks\/strategy-and-capability-sustaining-organizational-change-1st-edition-9780631228455-106280", "name": "Strategy And Capability Sustaining Organizational Change", "edition": "1st Edition" }, "question_posted": "2024-06-09 14:19:12", "see_more_questions_link": "\/study-help\/questions\/business-banking-2021-September-12", "step_by_step_answer": "The Answer is in the image, click to view ...", "students_also_viewed": [ { "url": "\/it-is-a-fact-that-the-federal-government-1-encouraged", "description": "It is a fact that the federal government (1) encouraged the development of the savings and loan industry, (2) virtually forced the industry to make long-term fixed-interest-rate mortgages, and (3)...", "stars": 3 }, { "url": "\/a-friend-came-to-you-to-discuss-a-potential-investment", "description": "A friend came to you to discuss a potential investment she was considering making. A quick look at the companys statement of cash flows shows the company had a \/ + \/ + (operating \/...", "stars": 3.5 }, { "url": "\/study-help\/theory-of-probability\/consider-a-closed-queueing-network-consisting-of-two-customers-moving-1982968", "description": "Consider a closed queueing network consisting of two customers moving among two servers, and suppose that after each service completion the customer is equally likely to go to either serverthat is,...", "stars": 3.5 }, { "url": "\/green-care-limited-gcl-manufactures-environmentally-friendly-electric-lawn-mowers", "description": "Green Care Limited (GCL) manufactures environmentally friendly electric lawn mowers, and demand has been growing rapidly. Management would like to develop cost formulas for planning and decision...", "stars": 3 }, { "url": "\/study-help\/questions\/what-quantity-of-energy-does-it-take-to-convert-0500kg-9868176", "description": "What quantity of energy does it take to convert 0.500kg ice at -20.C to steam at 250.C ?\\ Specific heat capacities: ice, 2.03(J)\/(g)\\\\\\\\times C ; liquid, 4.2(J)\/(g)\\\\\\\\times C ; steam,...", "stars": 3 }, { "url": "\/study-help\/questions\/question-21-question-21-3-points-hawkeye-company-fabricates-specialized-9594008", "description": "question 21 Question 21 (3 points) Hawkeye Company fabricates specialized arrows. Each arrow includes a sensor, which is currently made in-house. Details of the sensor fabrication are as follows:...", "stars": 3 }, { "url": "\/study-help\/questions\/dan-owned-a-farm-most-of-his-products-are-being-991923", "description": "Dan owned a farm. Most of his products are being supplied to different restaurants. Products include cow's milk, chicken egg, meat (chicken, pork, and beef). On the side, they also sell carrots,...", "stars": 3 }, { "url": "\/study-help\/questions\/task-1-a-describe-the-operation-of-the-following-thermodynamic-1024219", "description": "Task 1: A. Describe the operation of the following thermodynamic systems and their properties: (i) System (ii) Surroundings (iii) Open System (iv) Close System (v) Isolated System B. A large fraction...", "stars": 3 }, { "url": "\/study-help\/questions\/3-10-points-in-this-question-you-will-see-that-1002724", "description": "3. (10 points) In this question you will see that soft-SVM can be formulated as solving a regularized ERM rule, which uses a popular error function called hinge loss (see https:...", "stars": 3 }, { "url": "\/study-help\/questions\/suppose-that-ivanhoe-international-ltd-had-the-following-records-2025-999924", "description": "Suppose that Ivanhoe International Ltd. had the following records: 2025 2024 Ending inventory $48650 $27490 Cost of goods sold 222100 210890 What is Ivanhoe's average days in inventory for 2025?...", "stars": 3 }, { "url": "\/study-help\/questions\/1-if-custom-call-services-does-transition-to-a-1002858", "description": "1 . If Custom Call Services does transition to a PTO policy, what are some things that Stan should consider including in the policy to address concerns about absenteeism ?", "stars": 3 }, { "url": "\/study-help\/questions\/yes-its-clear-no-more-attachment-no-missing-information-3-5085881", "description": "yes its clear. no more attachment. no missing information 3 Optimal Consumption with Financial Wealth Now suppose the household lives for N periods, from Period 1 to N. Household receives an...", "stars": 3 }, { "url": "\/study-help\/management-and-cost-accounting\/intermediate-preparation-of-variable-costing-and-absorption-costing-profit-statements-1551226", "description": "Intermediate: Preparation of variable costing and absorption costing profit statements and an explanation of the differences in profits The following data have been extracted from the budgets and...", "stars": 3 }, { "url": "\/study-help\/management-and-cost-accounting\/intermediate-preparation-of-variable-and-absorption-costing-statements-solo-limited-1551227", "description": "Intermediate: Preparation of variable and absorption costing statements Solo Limited makes and sells a single product. The following data relate to periods 1 to 4. Required: (a) Prepare operating...", "stars": 3 }, { "url": "\/study-help\/management-and-cost-accounting\/intermediate-preparation-of-variable-and-absorption-costing-systems-and-cvp-1551225", "description": "Intermediate: Preparation of variable and absorption costing systems and CVP analysis (a) PQ Limited makes and sells a single product, X, and has budgeted the following figures for a one-year period:...", "stars": 3 } ], "next_back_navigation": { "previous": "\/study-help\/questions\/kindly-answer-it-in-details-4-example-aa-agrees-with-2517139", "next": "\/study-help\/questions\/what-is-the-present-value-of-2000-receivable-annually-for-2517141" }, "breadcrumbs": [ { "name": "Study help", "link": "https:\/\/www.solutioninn.com\/study-help\/questions-and-answers" }, { "name": "Business", "link": "https:\/\/www.solutioninn.com\/study-help\/questions-and-answers\/business" }, { "name": "Finance", "link": "https:\/\/www.solutioninn.com\/study-help\/questions\/business-finance" }, { "name": "Assignment 2 Fin 4305 Fall 2019 Charles Spurge, a mathematician with Ansco", "link": "https:\/\/www.solutioninn.com\/study-help\/questions\/assignment-2-fin-4305-fall-2019-charles-spurge-a-mathematician-2517140" } ], "skill_details": { "skill_id": "13", "skill_name": "Finance", "parent_id": "1" } }d": "1" } }