Hi, Can you please show the workings out in simple form, I really want to understand this process. (Thanks)

ACTIVITY: RE-BALANCING A CLIENT PORTFOLIO #2

Twelve months ago, you established an investment portfolio for your clients Emma and Alice. At the review next week, you are going to raise the issue again about the importance of maintaining their asset allocation so it is consistent with their risk profile and the investment strategy they both agreed on when the portfolio was first set up.

The original investment portfolio in the amount of $1,000,000 was split 60% in a European Bond Fund and 40% in an Australian Equity Managed Fund, in line with their target asset allocation.

Today you are reviewing Emma and Alice's investments, and the performance of both funds.

TheEuropean Bond Fundhas returned 3.5% and theAustralian Equity Managed Fund has returned 8.0% in the previous 12 months.

You want to re-balance Emma and Alice's portfolio back to their target asset allocation of 12 months agoin line with Strategic Asset Allocation principles.

What is the value of their portfolio taking into account the investment returns for the 12 months period? Show the amount in theEurope Bond Fundand theAustralian Equity Managed Fund.

Original Investment

Current Value of Investment after 12 months

European Bond Fund

Original Investment $Answer

Current Value of Investment after 12 months $Answer

Australian Equity Managed Fund

Original Investment $Answer

Current Value of Investment after 12 months $Answer

Total

Original Investment $Answer

Current Value of Investment after 12 months $Answer

Assuming Emma and Alice are comfortable re-balancing their portfolio and wish to proceed.

Question 1: How much should be in theEuropean Bond Fund?

$Answer

Question 2: How much should be in theAustralian Equity Managed Fund?

$Answer

Question 3: Which investment will be purchased?Answer

Drop down choice;

European Bond Fund

Australian Equity Managed Fund

and how much?$Answer

Question 4:Which investment will be sold?Answer

Drop down choice;

European Bond Fund

Australian Equity Managed Fund

and how much?$Answer