Question
Paterson Asset Management (PAM) wishes to create a Risk Allocated portfolio to take advantage of the economic forecasts. They would like to allocate marginal contribution
Paterson Asset Management (PAM) wishes to create a Risk Allocated portfolio to take advantage of the economic forecasts. They would like to allocate marginal contribution to risk (MCR) for the four assets as follows:
| Assets | Commodities | Hedge Funds | Private Equities | REITs |
| Proportion of MCR | 10% | 25% | 30% | 35% |
92 quarterly returns data for the four assets is provided in "Quiz 2.xlsx" in the tab "RA".
What dollar allocation (proportion) in each asset will produce the desired level of MCRs?
Commodities = 0.16; Hedge Funds =0.46; Private Equity = 0.17; REITs = 0.20
Commodities = 0.06; Hedge Funds =0.45; Private Equity = 0.2; REITs = 0.28
Commodities = 0.21; Hedge Funds =0.37; Private Equity = 0.3; REITs = 0.12
Not enough information to calculate the correct answer.
None of the three numerical answers are correct
| Quarter | EM | EAFE | US |
| 1 | -0.64 | 4.16 | 7.67 |
| 2 | -1.36 | 4.05 | 5.67 |
| 3 | 6.04 | 2.92 | 6.44 |
| 4 | 4.10 | 1.64 | 3.74 |
| 5 | -3.69 | -0.05 | 2.27 |
| 6 | -0.59 | 1.65 | 7.28 |
| 7 | 8.13 | -1.51 | 1.13 |
| 8 | 8.21 | 12.27 | 15.84 |
| 9 | -9.40 | -0.64 | 8.96 |
| 10 | -19.26 | -8.08 | 1.66 |
| 11 | 6.01 | 13.79 | 12.88 |
| 12 | -26.92 | 1.12 | 2.35 |
| 13 | -24.86 | -15.26 | -16.28 |
| 14 | 16.54 | 18.85 | 22.68 |
| 15 | 11.72 | 1.45 | 3.83 |
| 16 | 21.83 | 2.58 | 7.53 |
| 17 | -5.29 | 4.36 | -7.53 |
| 18 | 22.67 | 15.75 | 14.24 |
| 19 | 2.39 | -0.05 | 4.89 |
| 20 | -10.72 | -3.98 | -2.01 |
| 21 | -13.93 | -8.35 | -0.77 |
| 22 | -14.39 | -2.65 | -8.96 |
| 23 | -7.10 | -15.51 | -14.47 |
| 24 | 5.82 | 0.80 | 8.81 |
| 25 | -25.05 | -16.66 | -18.01 |
| 26 | 24.04 | 7.54 | 11.50 |
| 27 | 10.46 | 1.01 | 0.90 |
| 28 | -8.73 | -2.23 | -16.35 |
| 29 | -16.40 | -21.95 | -12.95 |
| 30 | 8.51 | 6.14 | 4.13 |
| 31 | -5.52 | -7.55 | -1.93 |
| 32 | 21.67 | 16.80 | 14.63 |
| 33 | 13.13 | 9.89 | 4.81 |
| 34 | 15.41 | 13.91 | 9.53 |
| 35 | 9.88 | 5.60 | 2.84 |
| 36 | -10.50 | -0.86 | -0.39 |
| 37 | 9.13 | 1.08 | 0.70 |
| 38 | 14.52 | 12.58 | 7.17 |
| 39 | 3.23 | 0.50 | -1.85 |
| 40 | 3.37 | -1.37 | 3.16 |
| 41 | 16.10 | 9.81 | 3.59 |
| 42 | 7.05 | 4.82 | 2.02 |
| 43 | 13.10 | 9.90 | 5.26 |
| 44 | -4.59 | 0.33 | -1.31 |
| 45 | 3.68 | 4.13 | 3.36 |
| 46 | 15.90 | 9.18 | 7.27 |
| 47 | 2.21 | 4.28 | 1.54 |
| 48 | 15.39 | 6.97 | 6.45 |
| 49 | 13.39 | 2.07 | 1.82 |
| 50 | 2.53 | -2.31 | -4.79 |
| 51 | -10.76 | -8.32 | -6.55 |
| 52 | -3.35 | -4.53 | -4.83 |
| 53 | -29.67 | -20.31 | -10.05 |
| 54 | -31.94 | -23.16 | -25.26 |
| 55 | 2.70 | -13.50 | -9.80 |
| 56 | 29.56 | 23.01 | 14.49 |
| 57 | 17.26 | 14.58 | 11.80 |
| 58 | 8.51 | 4.02 | 8.46 |
| 59 | 4.11 | 2.12 | 6.54 |
| 60 | -11.29 | -16.72 | -13.17 |
| 61 | 18.61 | 16.48 | 11.73 |
| Portfolio |
| 5.306 |
| 3.937 |
| 5.657 |
| 3.394 |
| 0.615 |
| 4.579 |
| 2.004 |
| 13.602 |
| 3.369 |
| -4.470 |
| 11.685 |
| -3.751 |
| -17.790 |
| 20.686 |
| 4.932 |
| 9.397 |
| -4.701 |
| 16.229 |
| 3.404 |
| -4.145 |
| -4.915 |
| -8.785 |
| -13.205 |
| 6.611 |
| -19.149 |
| 13.217 |
| 2.835 |
| -12.001 |
| -15.439 |
| 5.411 |
| -3.769 |
| 16.474 |
| 7.493 |
| 11.578 |
| 4.800 |
| -2.508 |
| 2.460 |
| 9.722 |
| -0.365 |
| 2.295 |
| 7.334 |
| 3.588 |
| 7.758 |
| -1.636 |
| 3.582 |
| 9.382 |
| 2.219 |
| 8.343 |
| 4.181 |
| -2.833 |
| -7.747 |
| -4.471 |
| -16.027 |
| -26.177 |
| -8.041 |
| 19.207 |
| 13.449 |
| 7.584 |
| 5.172 |
| -13.501 |
| 14.058 |
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Fundamentals of Investing
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
12th edition
978-0133075403, 133075354, 9780133423938, 133075400, 013342393X, 978-0133075359
