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Svetlana is a private banker at Union des Sharp Banks, USB. Her client, Mr. Aldo Gambleur, has US$1 million of investable assets: he is comfortable
Svetlana is a private banker at Union des Sharp Banks, USB. Her client, Mr. Aldo Gambleur, has US$1 million of investable assets: he is comfortable with taking risk. Therefore Svetlana allocated 20% of Aldo's portfolio to US T bills (earning only 5%) and 80% to the famous balanced portfolio P known as VOLMX, which consists of 60% equities and 40% bonds. The expected return of VOLMX is 15% and its volatility is 20%. After listening to Jim Cramer on CNBC, Aldo gets bearish and decides to reduce risk, so he asks Svetlana to reduce the share y of the risky portfolio P to 60%. In order to implement Aldo's request, Svetlana will have to sell US$__________ of VOLMX, sell US$ _________ of equities and US$__________ of bonds to buy_________ in US Tbills. Please mark the only CORRECT answer. a. 400,000; 240,000; 160,000; 400,000 b. 200,000; 80,000; 120,000; 200,000 c. 160,000; 128,000; 32,000; 160,000 d. 200,000; 120,000; 80,000; and 200,000
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