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Please answer only parts a,b,c, and and f, provide an explanation for each response. I will rate your answer. Thank you! INTEGRATED CASE MERRILL FINCH
Please answer only parts a,b,c, and and f, provide an explanation for each response. I will rate your answer. Thank you!
INTEGRATED CASE MERRILL FINCH INC. RISK AND RETURN financial planner with Merrill Finch Inc, a large financial services corporation. Your first assignment is to invest $100,000 for a client. Because the funds are to be invested in a business at the end of 1 year, you have been instructed to plan for a 1-year holding period. Further, your boss has restricted you to the investment alternatives in the following table, shown with their probabilities and associated outcomes. (For now 8-23 Assume that you recently graduated with a major in finance. You just landed a job as a disregard the items at the bottom of the data; you will fill in the blanks later.) Returns on Alternative Investments Estimated Rate of Return State of the Economy Recession Below average Average Above average Boom High Market Two-Stock Probability T-Bills Tech Collections Rubber Portfolio Portfolio U.S. 0.1 0.2 0.4 0.2 0.1 30% (29.5%) (9.5) 12.5 27.5 24.5% 3.5%" (19.5%) (5.5) 7.5 22.5 (2.5%) 3.0 3.0 10.5 (16.5) 0.5 38.5 5.8 (5.0) 3.0 42.5 20.0 23.5 35.5 113 1.2% 7.3% 18.8 8.0% 15.2 1.9 0.0 11.2 A.6 CV -0.50 26 0.88 9.8 0.50 0.8 Note ays move in the same direction as the overall economy. For example, when the economy is below average, consumers purchase fewer tires than they would if the economy was stronger. However,i the economy is in a flat-out recession, a large number of consumers who were planning to purchase a new car may choode to wait and instead purchase new tires for the car they currently own. Under these circumstances, we would expect US Rubber's stock price to be higher if there is a recession than if the economy is just below average
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