need help with problem 8. part a) and part b) along with part i), ii), iii)
please and thank you
Asset Allocation 8) You are provided with capital market assumptions for seven asset classes. a) Which asset class is unlikely to be an actual asset class, i.e., I made it up? In other words, which "asset class" has a combination of characteristics that are unlikely? Why? Explain. (It is not asset class A, US Large Cap Equities) 8 pts b) Pretend your portfolio is 100% invested in US Large Cap Equities. You are seeking to achieve an annual portfolio return around 7.0%. You want to diversify your portfolio and reduce your portfolio risk. Select three (3) asset classes that will help you achieve your two portfolio goals, namely a 7% return and less than a 16% standard deviation of portfolio returns. For each asset class, provide two (2) reasons why you selected the asset class. i) Asset Class 1: two reasons 8 pts ) Asset Class 2: two reasons 8 pts ill) Asset Class 3: two reasons 8 pts Asset Class A B Expected Annual Return I 7.00% 7.50% 8.25% 2.50% 4.50% 2.00% 5.00% Asset Class US Large Cap Eq Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Expected Annual Standard Deviation 16.0% 20.0% 22.0% 6.0% 10.0% 18.0% 8.0% D E F G Asset Class A B D E F G Asset Class US Large Cap Eq Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Expected Annual Return 7.00% 7.50% 8.25% 2.50% 4.50% 2.00% 5.00% Expected Annual Standard Deviation 16.0% 20.0% 22.0% 6.0% 10.0% 18.0% 8.0% Correlation Matrix Asset Class A 1.00 B 0.92 1.00 0.78 0.77 D 0.00 0.00 E 0.60 0.60 -0.10 -0.10 G -0.30 -0.35 Asset Class A B T 1.00 1.00 0.00 0.55 -0.10 -0.35 0.00 -0.25 0.10 1.00 -0.10 -0.15 E 1.00 0.25 F 1.00 G D Asset Allocation 8) You are provided with capital market assumptions for seven asset classes. a) Which asset class is unlikely to be an actual asset class, i.e., I made it up? In other words, which "asset class" has a combination of characteristics that are unlikely? Why? Explain. (It is not asset class A, US Large Cap Equities) 8 pts b) Pretend your portfolio is 100% invested in US Large Cap Equities. You are seeking to achieve an annual portfolio return around 7.0%. You want to diversify your portfolio and reduce your portfolio risk. Select three (3) asset classes that will help you achieve your two portfolio goals, namely a 7% return and less than a 16% standard deviation of portfolio returns. For each asset class, provide two (2) reasons why you selected the asset class. i) Asset Class 1: two reasons 8 pts ) Asset Class 2: two reasons 8 pts ill) Asset Class 3: two reasons 8 pts Asset Class A B Expected Annual Return I 7.00% 7.50% 8.25% 2.50% 4.50% 2.00% 5.00% Asset Class US Large Cap Eq Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Expected Annual Standard Deviation 16.0% 20.0% 22.0% 6.0% 10.0% 18.0% 8.0% D E F G Asset Class A B D E F G Asset Class US Large Cap Eq Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Expected Annual Return 7.00% 7.50% 8.25% 2.50% 4.50% 2.00% 5.00% Expected Annual Standard Deviation 16.0% 20.0% 22.0% 6.0% 10.0% 18.0% 8.0% Correlation Matrix Asset Class A 1.00 B 0.92 1.00 0.78 0.77 D 0.00 0.00 E 0.60 0.60 -0.10 -0.10 G -0.30 -0.35 Asset Class A B T 1.00 1.00 0.00 0.55 -0.10 -0.35 0.00 -0.25 0.10 1.00 -0.10 -0.15 E 1.00 0.25 F 1.00 G D
