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

Of the five mutual funds listed, rank them from high to low solely in terms of risk.

a$.$ Which fund is highest and why?

b$.$ Which fund is second highest and why?

c$.$ Subtract the return of the second highest fund from the highest fund. What does

this difference in return represent?

Suppose you decide to invest $$10,000$ of gross income $($i$.$e$.,$ pre$-$tax$)$ in the Bledsoe S&P

$500$ Index Fund and that the fund has an $11\mathrm{.}04\%$ annual return. Ignore any other taxes,

fees, issues, employer match, etc. not mentioned below.

a$.$ Assuming annual compounding, how much money will you have in ten years?

i$.$ Calculate the dollar amount assuming the initial investment is made with

pre$-$tax dollars.

Also, calculate the after$-$tax amount $($assume a $35\%$ tax rate on both

principal and capital gains$)$ in year ten.

ii$.$ Calculate the dollar amount assuming the initial investment is made with

after$-$tax dollars $($assume a $35\%$ tax rate$)$ and no taxes are deducted in year

ten.

Suppose you invest in the Bledsoe S&P $500$ Index Fund for ten years and earn a Holding

Period Return $($HPR$)$ of $184\mathrm{.}97\%.$

a$.$ What is your annual arithmetic return?

b$.$ What is your annual geometric return?

Calculate the Sharpe ratio for Bledsoe's S&P $500$ Index, Small$-$Cap, Large$-$Company

Stock, and Bond funds $($both net of expenses and ignoring expenses$).$ Assume a risk$-$free

rate of $0\mathrm{.}50\%.$

a$.$ Which fund has the highest Sharpe ratio $($ignoring expenses$)?$

b$.$ Which fund has the highest Sharpe ratio $($net of expenses$)?$

i$.$ What is the interpretation of this fund's ratio?

Assume the expected return for Bledsoe's Large$-$Company Stock Fund is $12\mathrm{.}15\%($with

standard deviation of $24\mathrm{.}43\%)$ and $6\mathrm{.}93\%$ for the Bond Fund $($with standard deviation of

$9\mathrm{.}96\%).$ You decide to allocate $80\%$ of your investment to the stock fund and $20\%$ to the

bond fund. Ignore expenses.

a$.$ What is your portfolio expected return?

b$.$ What is your portfolio standard deviation?

i$.$ Assuming correlation of $0\mathrm{.}75.$

ii$.$ Assuming correlation of $0.$

iii. Assuming correlation of $-0\mathrm{.}75.$

Calculate the Sharpe ratios for i$.,$ ii$.,$ and iii. $($ignore expenses and

assume a risk$-$free rate of $0\mathrm{.}50\%).$ Which portfolio was the highest?

If you were this new employee, what portfolio allocation would you choose and why?