QUESTIONS

What advantages do the mutual funds offer compared to the company stock?

Assume that you invest $5$ percent of your salary and receive the full $5$ percent match from S&S Air. What EAR do you earn from the

match? What conclusions do you draw about matching plans?

Assume you decide you should invest at least part of your money in large$-$capitalization stocks of companies based in the United States.

What are the advantages and disadvantages of choosing the Bledsoe Large$-$Company Stock Fund compared to the Bledsoe S&P $500$

Index Fund?

The returns on the Bledsoe Small$-$Cap Fund are the most volatile of all the mutual funds offered in the $401($k$)$ plan. Why would you ever

want to invest in this fund? When you examine the expenses of the mutual funds, you will notice that this fund also has the highest

expenses. Does this affect your decision to invest in this fund?

A measure of risk$-$adjusted performance that is often used is the Sharpe ratio. The Sharpe ratio is calculated as the risk premium of an

asset divided by its standard deviation. The standard deviation and return of the funds over the past $10$ years are listed in the following

table. Calculate the Sharpe ratio for each of these funds. Assume that the expected return and standard deviation of the company stock

will be $17$ percent and $70$ percent, respectively. Calculate the Sharpe ratio for the company stock. How appropriate is the Sharpe ratio for

these assets? When would you use the Sharpe ratio?

What portfolio allocation would you choose? Why? Explain your thinking carefully.