Task overview\ In Part 1, students will build a strategic asset allocation consistent with their risk profile. Each student will\ be assigned a risk profile.\ Find your assigned level of risk tolerance from the following table: Your risk tolerance is assigned based\ on your first name.\ Risk Tolerance Student whose first name begins with the\ following letters.\ Very low A, B, C, D, E, F, G\ Low H, I, J, K\ Moderate L, M, N, O, P, Q, R\ High S, T, U, V, W\ Very high X, Y, Z\ Students are required to use this risk profile and select assets from the Capital Market Assumptions given\ in Appendix 1 to create your strategic asset allocation.\ Detailed questions\ 1. You have been assigned an investor profile that describes your risk tolerance. You must answer the\ following questions for the risk tolerance level assigned to you. Your financial goal is to save for\ retirement. Risk tolerance is defined in terms of the maximum loss (maximum drawdown) of your\ portfolio you are comfortable with, as shown in Table 1.\ Table 1: Risk tolerance\ Risk Tolerance Maximum acceptable loss\ Very low 10%\ Low 15%\ Moderate 20%\ High 30%\ Very high 40%\ 2\ a) From the following reference portfolios in Table 2 and the information provided in Table 3,\ choose the one that fits your assigned risk profile. To calculate the maximum drawdown of a\ reference portfolio, use this rule of thumb: Maximum drawdown = 3xVolatility. Please\ mention your risk tolerance level when you answer this question. (4 points)\ Table 2: Reference portfolios\ Global Equity Global Bond Hedged*\ Portfolio 1 100% 0%\ Portfolio 2 70% 30%\ Portfolio 3 45% 55%\ Portfolio 4 20% 80%\ Portfolio 5 5% 95%\ *Hedged means hedged in Australian dollars.\ Table 3: Capital Market Assumptions (Expected 10-year annualised)\ Correlation Coefficient\ Expected\ Return\ Expected\ Volatility\ Global Equity Global Bond\ hedged\ Global Equity 7.20 13.37 1 0.11\ Global Bond Hedged 4.56 3.50 0.11 1\ b) Explain why you selected this reference portfolio (i.e., how the chosen reference portfolio is\ consistent with your risk profile and others are not). (4 points)\ c) What is your reference portfolio's expected rate of return and volatility? (show calculation)\ (3 points)