1. Jerry and Linda Hawkinson need financial guidance. They met with three financial advisors to compare the advisors before they hired one. Though their forms were slightly different format, all three financial advisors collected essentially the same information and asked very similar questions.

Advisor Firm fee Return Risk S.D

Jane Best Morgan Stanley Engaging smar 1.00% 6% 11%

Will Yander Fidelity Smart,funny 1.00% 6.5% 13.5%

Ann Ruzicka JP Morgan Very serious, smart, dull 1.00% 6.25% 12.5%

Strategic Asset Allocations

Jane Best Morgan Stanley

Asset Class Weight

U.S.Large Cap equity 70%

U.S. Treasuries 30%

Will Yander Fidelity

Asset Class Weight

U.S. Large Cap equity 80%

U.S Treasuries 20%

Ann Ruzicka JP Morgan

Asset Class Weight

U.S. Large Cape 80%

U.S. Treasuries 20%

1. Calculate the expected return and risk (s.d.) for each portfolio and determine whether it meets the established risk and return objectives for the Hawkinsons. All advisors use the same capital Market Assumptions:

• The expected return for U.S. Large Cap Equity is 7.42% and the expected return for U.S. Treasuries is 3.05%.
• The expected standard deviation for U.S. Large Cap Equity is 16.17% and the expected return for U.S. Treasuries is 2.31%.
• The expected correlation for U.S. Large Cap Equity and U.S. Treasuries is -0.06.

Show your work.

2. Which advisor do you think they should choose? Why?