Robert and April Johnson have come to you with a portfolio of invesments that seem to be a mixture of past advisers uncoordinated recommendations. One positive is that some of the funds seem to be doing well, another is that all the funds are tax-deferred acounts held for specific purposes, and a third is that the Johnsons seem to be able to meet their goals. So your job is not so much financial planning as investment planning. Table 1.0 contains data on what the clients have brought to you.

Robert and April have only two goals: the college education of their twins in six years and their retirement in 20 years. Ignore the amounts necessary to achieve their objectives. Assume that the allocation of their current funds is equal in ech accunt. Also assume the amount in the Education Savings Account is enough to fund their education goal. Assume that their current savings rate plus their 401(k) is just sufficient to meet their retirement goal with a high level of condifence. Your assignment is as follows:

5. Robert and April are not well educated about investing. Provide support for your your recommendations. Write your recommendations in a way that educates and explains portfolio risk and return to the Johnsons.

Fund	Class	Portfolio	Current Allocation	Beta (to S &P)	Sharpe Ratio	Treynor Ratio	Jensens Alpha
1	Domestic growth	401(k)	16.7%	1.1	0.773	15.455	1.5%
2	Global growth	401(k)	16.7%	0.8	0.625	18.75	0.3%
3	Balanced	401(k)	16.7%	0.6	0.667	16.667	-0.4%
4	U.S. bonds, mixed grade	Education Savings Account	16.7%	3.6 years duration	NMF	NMF	+1% (to bonds index
5	S & P 500 index	Education Savings Account	16.7%	1.0	0.770	17.0	-.10%
6	Equity income	Education Savings Account	16.7%	0.8	1.06	21.25	3.0%

*MNF No Meaningful Figure.