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I need help with this assignment. I am assuming that the answers are not very complex. FN480 Unit 5 Assignment 1. A client's portfolio is
I need help with this assignment. I am assuming that the answers are not very complex.
FN480 Unit 5 Assignment 1. A client's portfolio is set up according to the table below. According to the IPS statement, the portfolio will use percentage-of-portfolio rebalancing with the corridors shown in the table, and the rebalancing is to target weights. Asset Class U.S. Stocks U.S. Bonds Foreign Stocks Total Target Weight 70% +/- 4% 20% +/- 3% 10% +/- 2% n/a Beginning Value $70,000 $20,000 $10,000 $100,000 Current Value $75,300 $20,400 $14,300 $110,000 Current Weight Target Value Action n/a $110,000 n/a a. Fill in the current weights, then explain exactly why this specific portfolio must be rebalanced. (Do not just explain why portfolios must be rebalanced in general). b. In the Target Value column, determine how much money should be allocated to each asset class to rebalance to the target weights. c. In the Action column, describe what must be done in each asset class to perform the rebalance. (For example, \"buy $1000 worth\" or \"sell $500 worth.\") d. Explain the two primary types of costs that will occur in the rebalance. 2. You are managing a $10 million portfolio using the constant proportion portfolio insurance (CPPI) strategy, with multiplier 2 and floor value $6 million. a. Determine the amount of this portfolio that should be in stocks. Show work. The remainder of the portfolio will be in bonds. b. Suppose that after one year, the stocks have increased in value by 10%, and the bonds have not changed in value. Before any changes are made to the portfolio, determine the value of stocks and the total portfolio value. c. Applying the CPPI strategy, determine the new value that should be in stocks, and explain the action that must be taken to achieve that value. d. Explain the purpose of the CPPI strategy, and relate this to the rebalancing that occurred in this question. 3. On January 1, a client's portfolio has a value of $100,000. On March 1, the client deposits $5,000 into the account, and the account value is $106,500 after the deposit. On December 31, the account value is $117,000. a. Find the rate of return between January 1 and March 1. (Express this answer and the next as a decimal to four places, or equivalently, a percent to two places). b. Find the rate of return between March 2 and December 31. c. Find the time-weighted rate of return for the year using the chain linking method. Show work. 4. A midcap value fund has a return of 14% in a particular year. Over the same period, the midcap value index fund used as a benchmark has a return of 16%, and a broad market index has a return of 10%. a. Find the return due to the fund manager's style. Intuitively explain this result. b. Find the return due to active management. Intuitively explain this result. 5. The following data has been recorded for Portfolio A, Portfolio B, and the market. The risk-free rate is 1%. Calculate the requested measures. Show work for all answers. When interpreting the results, be specific to the measure you are discussing. In other words, do not just say \"Portfolio X had a better risk-adjust return\" for every answer. return standard deviation beta Portfolio A 12% 17% 1.1 Portfolio B 15% 26% 1.9 Market 10% 16% 1.0 a. Find Jensen's alpha for Portfolio A and for Portfolio B. Show work. Interpret the results. b. Find the Treynor measure for Portfolio A, for Portfolio B, and for the market. Show work. Interpret the results. c. Find the Sharpe measure for Portfolio A, for Portfolio B, and for the market. Show work. Interpret the results. d. Find the M2 measure for Portfolio A and for Portfolio B. Interpret the resultsStep by Step Solution
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