C D E G Asset Class Frugal Tim Spendthrift Elizabeth Domestic Equities 5% 45% Overseas Equities 10% 50% Fixed-Income Nominal Bonds 15% 0% Inflation-Linked Bonds 20% 0% Real Estate 30% 0% 9 Cash and Cash Equivalent 20% 5% 10 Total 100% 100% 11 Note: For ease, all cells but the ones requiring candidates to enter formula or comments are locked 12 Risk-Free Rate 1.80% 13 14 Actual Returns on Individual Asset Classes 15 Month 16 Jan 22 17 Feb 22 18 Mar 22 19 Apr 22 20 May 22 21 Jun 22 22 Jul 22 23 24 25 Aug 22 Sep 22 Oct 22 26 Nov 22 27 Dec 22 28 Expected Annual Return Domestic Equities Overseas Equities Fixed Income Nominal Bonds Inflation Linked Bonds Real Estate Cash and Cash equivalent (0.56%) 2.37% 0.47% 0.63% 0.31% 0.02% 1.31% 1.19% 0.24% 0.31% 0.16% 0.02% 2.12% (1.78%) 0.35% 0.47% 0.24% 0.02% 2.62% (3.56%) 0.71% 0.94% 0.47% 0.02% 0.28% (0.59%) (0.12%) 0.16% 0.08% 0.02% 1.11% (0.59%) 0.12% 0.16% 0.08% 0.02% 1.14% 0.89% 0.18% 0.24% 0.12% 0.02% 1.45% 1.19% 0.24% 0.31% 0.16% 0.02% (2.38%) (4.15%) (0.83%) (1.10%) 0.55% 0.02% 3.46% 4.15% 0.83% 1.10% 0.55% 0.02% (0.42%) (1.19%) (0.24%) (0.31%) 0.16% 0.02% 2.18% 2.96% 0.59% 0.79% 0.39% 0.02% 12.87% 0.54% 2.55% 3.74% 3.31% 0.24% 29 "Monthly returns are compounded to calculate annual returns. 30 31 Portfolio Allocation 32 Client 33 Frugal Tim 34 Spendthrift Elizabeth Domestic Equities 5% 45% Overseas Equities Fixed Income Nominal Bonds 10% 15% 50% 0% Inflation Linked Bonds 20% 0% Real Estate 30% 0% Cash and Cash equivalent 20% 5% 35 *Assume the above asset weightings remain unchanged throughout the year. 36 37 Actual Portfolio Return 38 Client % .. 39 Frugal Tim 40 Spendthrift Elizabeth Covariance Matrix Asset Class Domestic Equities Overseas Equities Fixed Income Nominal Bonds Inflation Linked Bonds Real Estate Cash and Cash equivalent Domestic Equities Overseas Equities Fixed-Income Nominal Bonds Inflation-Linked Bonds Real Estate Cash and Cash Equivalent Variances within Portfolio Client Frugal Tim Spendthrift Elizabeth Results Client Frugal Tim Spendthrift Elizabeth Domestic Equities Overseas Equities Fixed Income Nominal Bonds Inflation Linked Bonds Real Estate Cash and Cash equivalent Actual Return Portfolio Variance Standard Deviation (Volatility) Sharpe Ratio Comments