An investor has $80,000 to invest in a CD and a mutual fund. The CD yields 8% and the mutual fund yields 7%. The mutual fund requires a minimum investment of $9,000, and the investor requires that at least twice as much should be invested in CDs as in the mutual fund. How much should be invested in CDs and how much in the mutual fund to maximize the return? What is the maximum return? To maximize income, the investor should place $ in CDs and $ in the mutual fund. (Round to the nearest dollar as needed.)

An investor has $80,000 to invest in a CD and a mutual fund. The CD yields 8% and the mutual fund yields 7%. The mutual fund requires a minimum investment of $9,000, and the investor requires that at least twice as much should be invested in CDs as in the mutual fund. How much should be invested in CDs and how much in the mutual fund to maximize the return? What is the maximum return? To maximize income, the investor should place $ in CDs and $ in the mutual fund. (Round to the nearest dollar as needed.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A mutual fund manager expects her portfolio to earn a rate of return of 11% this year. The beta of her portfolio is 0.9. The rate of return available on risk-free assets is 4% and you expect the rate of return on the market portfolio to be 14%. a. What expected rate of return would you demand before you would be willing to invest in this mutual fund? Note: Do not round intermediate calculations. Enter your answer as a whole percent. b. Is this fund attractive to you? a. "Expected rate of return b. Is this fund attractive to you? %
Explain different types of money market instruments. In each of the below cases, which money market instruments would you recommend and why?a. A mutual fund manager has INR 450 million of cash, which he needs to park for a period of less than 180 days, where he will move this to equity.b. An oil refining company wishes to borrow INR 1500 million for a period of 90 days to fund its settlement of invoices.
You have a new job as a Financial Planning assistant. Your client wants to invest money in stocks, bonds, and treasuries that have the dividend yields shown in the table below. Your job is to allocate their money across these three investments such that the total dollars of stocks is at least $10,000 less than the total dollars in bonds plus treasuries. In addition, they have identified the maximum investment in each of those three investment types (also shown below). Maximize the dividends earned. Your answer will be the amount invested in Stocks (rounded to whole dollars). Use Scenario 3 Stocks: yield % Bonds: yield % Treasuries: yield % Stocks: $ max Bonds: $ max Treasuries: $ max Scenario 1 2.22 2.04 1.93 170,000 60,000 50,000 Scenario 2 1.71 1.98 1.88 400,000 180,000 200,000 Scenario 3. 1.14 3.03 2.08 410,000 300,000 75,000 Scenario 4 1.25 1.48 2.55 800,000 280,000 500,000
A company's fund manager has a P20,000,000 portfolio with a beta of 0.75. The risk-free rate is 4.50% and the market risk premium is 5.00%.The manager expects to receive an additional P30,000,000, which she plans to invest in several stocks. After investing the additional funds, she wants the fund's required return to be 9.50%. 1. What is the required rate of return on the initial P20M investment? 2. What is the rate of return of all risky and risk-free securities? 3. To achieve the fund manager’s required return target, the funds should be invested in an investment with a beta of 4. Judge the overall riskiness of the P50M portfolio A. Aggressive B. Neutral C. Conservative
If you have a 5.75% back-load charge and you invest $4,000, how much of this money will be invested in the mutual fund? Amount invested in the mutual fund:
Suppose that we make contributions to a fund of $125 today and $750 in twoyears for a return of $1000 in one year. First write the Net Present Value as a function of the discount factor ν. Secondly, use the NPV to calculate the yield rate of this investment (select the larger value for i. Finally, explain whether or not this is a good investment for us. Please show all work
3) Suppose the value function v(.) of an investment fund manager is defined by: v(x) = x for gains and v(x) = -2|x| for losses. Yesterday, the fund manager had a good day: their investments earned $15m. Today, the fund manager had a bad day: their investments lost $10m. a) What is the fund manager's value if they integrate the investment returns for the two days? b) What is the fund manager's value if they evaluate the investment returns for the two days separately? c) Discuss how an investor's information evaluation horizon (i.e., frequent vs infrequent) might affect their investment strategy.
1. Suppose there is a mutual fund and each consumer buys a share in it for her endowment at t = 0. The mutual fund | maximises the wealth of its shareholders when choosing IF, the investment in the long term technology. At t =1, the mutual fund pays dividend d to each of its shareholders. At t = 1, the shares can be traded at price p". a. Set up the mutual fund's optimisation problem and derive and interpret the first order condition. What happens when R increases and why? b. What is the optimal consumption profile cf, c and the optimal investment IF? | c. Calculate (i.e. derive an expression for) d and p".
Consider the following information for the Alachua Retirement Fund, with a total investment of $4 million. The market required rate of returnis 12%, and the risk-free rate is 6%. What is its required rate of return? Stock Investment Beta A $500,000 1.2 B 500,000 -0.4 C 1,000,000 1.5 D 2,000,000 0.8 Total 4,000,000 Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Suppose at the start of the year, a no-load mutual fund has a net value of RM27.15 per share. During the year, it pays its shareholders a capital gain and dividend distribution of RM1.12 per share and finishes the year with NAV of RM30.34. Required: a. b. If at the end of the year, the fund is selling is selling at 5% discount, what is the rate of return? C. What is the return to an investor who holds 2000 shares of this fund in his retirement account? d. Differentiate between open end and closed end funds. Assume at the end of year, the company change its policy and charge. 12b-1 fees of 2%, What is the rate of return?
Suppose you have some money to invest-for simplicity, $1-and you are planning to put a fraction w into a stock market mutual fund and the rest, 1 w, into a bond mutual fund. Suppose that $1 invested in a stock fund yields R after 1 year and that $1 invested in a bond fund yields Rp. suppose that R, is random with mean 0.08 (8%) and standard deviation 0.07, and suppose that R, is random with mean 0.05 (5%) and standard deviation 0.04. The correlation between R and R, is 0.25. If you place a fraction w of your money in the stock fund and the rest, 1 - w, in the bond fund, then the return on your investment is R=wR, +(1-w)Rb Suppose that w=0.51. Compute the mean and standard deviation of R. The mean is. (Round your response to three decimal places.) The standard deviation is. (Round your response to three decimal places.)
Your broker has suggested that you diversify your investments by splitting your portfolio among mutual funds, municipal bond funds, stocks, and precious metals. They suggest three good mutual funds, five municipal bond funds, five stocks, and three precious metals (gold, silver, and platinum). How many different portfolios can you create if the portfolio is to contain one of each type of investment?

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