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    sally2's Avatar
    sally2 Posts: 2, Reputation: 1
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    #1

    Jun 14, 2013, 06:13 AM
    Please help with this finance problem
    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?
    JudyKayTee's Avatar
    JudyKayTee Posts: 46,503, Reputation: 4600
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    #2

    Jun 14, 2013, 06:17 AM
    AMHD has a posted "we don't do homework" policy -

    Or is this for something else?

    If so, what have you figured out so far?
    sally2's Avatar
    sally2 Posts: 2, Reputation: 1
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    #3

    Jun 14, 2013, 06:22 AM
    Quote Originally Posted by JudyKayTee View Post
    AMHD has a posted "we don't do homework" policy -

    Or is this for something else?

    If so, what have you figured out so far?
    It's a practice problem for my final exam.
    What I have done so far is I calculated the expected rate of return of the portfolio and I got 8.85%. But I don't know how to proceed with part b. I know that the T-bills have a beta of zero, but I don't know how to calculate the Beta for S&P/TSX Index Fund.

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