Question $2$ The Individual Investor $(20$ marks$)$

Bill Brown is $62$ years old, married and has two children, ages $12$ and $7.$ He recently received an

inheritance of $$1,000,000$ and is considering investing "real money" for the first time. Bill living

expenses totals $$250,000$ and lives in a low inflationary environment of $3\%.$ Bill loves to read

the financial press and indicates that if he had money in the past, he could have taken advantage

of the risky securities opportunities. Bill believes he has an above average tolerance for risk

taking in investment activities, and enjoys any risky activies like skydiving, etc. instead of

golfing.

i$.$ Calculate Bill's return objective $(5$ marks$)$

ii$.$ State and explain Bill's ability to take risk $(5$ marks$)$

iii. State and explain Bill's time horizon $(5$ marks$)$

iv$.$ Which allocation strategy from the table below is most appropriate for BIll $($explain in

terms of requirement objective and return per risk$)(5$ marks$)$Bill Brown is $62$ years old, married and has two children, ages $12$ and $7.$ He recently received an inheritance of $$1,000,000$ and is considering investing $$real money$$ for the first time. Bill living expenses totals $$250,000$ and lives in a low inflationary environment of $3\%.$ Bill loves to read the financial press and indicates that if he had money in the past, he could have taken advantage of the risky securities opportunities. Bill believes he has an above average tolerance for risk taking in investment activities, and enjoys any risky activies like skydiving, etc. instead of golfing.

i$.$ Calculate Bill$$s return objective $(5$ marks$)$

ii$.$ State and explain Bill$$s ability to take risk $(5$ marks$)$

iii. State and explain Bill$$s time horizon $(5$ marks$)$

iv$.$ Which allocation strategy from the table below is most appropriate for BIll $($explain in

terms of requirement objective and return per risk$)(5$ marks$)$