sally2
Jun 14, 2013, 06:13 AM
Barry is 60 years old and considering retiring. Barry’s retirement portfolio is currently valued at $750,000 and is allocated in T-Bills, a S&P/TSX Index
Fund and a Equity Fund as follows:
Expected Return $ Value
T-Bills 4.5% $75,000
S&P/TSX Index Fund 8.0% $450,000
Equity Fund 12.0% $225,000
a) Based on the current portfolio composition and the expected rates of return, what is the expected rate of return of portfolio?
b) If the Equity Fund has a beta of 1.4, what is the beta of portfolio?
c) Barry is considering a reallocation of his investments to include more T-Bills and less risk. If Barry moves all of his money from the Equity Fund and puts it in T-Bills, what will be the expected rate of return and beta of the resulting portfolio?
d) If Barry only wants to invest in T-Bills and the Equity Fund, how much money will he have to invest in each to have a portfolio beta of 1.19?
Fund and a Equity Fund as follows:
Expected Return $ Value
T-Bills 4.5% $75,000
S&P/TSX Index Fund 8.0% $450,000
Equity Fund 12.0% $225,000
a) Based on the current portfolio composition and the expected rates of return, what is the expected rate of return of portfolio?
b) If the Equity Fund has a beta of 1.4, what is the beta of portfolio?
c) Barry is considering a reallocation of his investments to include more T-Bills and less risk. If Barry moves all of his money from the Equity Fund and puts it in T-Bills, what will be the expected rate of return and beta of the resulting portfolio?
d) If Barry only wants to invest in T-Bills and the Equity Fund, how much money will he have to invest in each to have a portfolio beta of 1.19?