From the following asset allocation, select the one allocation the best serves the need of the endowment fund and justify its selection by maximizing the three criteria simultaneously and also considering Liquidity in your final decision i. Return objective ii. Efficiency iii. Diversification PORTFOLIO A B C D EXPECTED RETURN 8.8% 8.5% 7.9% 7.8% LIQUIDITY 5.2% 5.7% 4.5% 4.3% SHARE RATIO 0.27 0.20 0.21 0.26 CORRELATION OLD & NEW -0.2 +0.2 +0.2 -0.2
From the following asset allocation, select the one allocation the best serves the need of the endowment fund and justify its selection by maximizing the three criteria simultaneously and also considering Liquidity in your final decision i. Return objective ii. Efficiency iii. Diversification PORTFOLIO A B C D EXPECTED RETURN 8.8% 8.5% 7.9% 7.8% LIQUIDITY 5.2% 5.7% 4.5% 4.3% SHARE RATIO 0.27 0.20 0.21 0.26 CORRELATION OLD & NEW -0.2 +0.2 +0.2 -0.2
Chapter12: Corporate Valuation And Financial Planning
Section: Chapter Questions
Problem 1Q
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Question
From the following asset allocation, select the one allocation the best serves the need of the endowment fund and justify its selection by maximizing the three criteria simultaneously and also considering Liquidity in your final decision
i. Return objective
ii. Efficiency
iii. Diversification
|
PORTFOLIO |
|||
|
A |
B |
C |
D |
EXPECTED RETURN |
8.8% |
8.5% |
7.9% |
7.8% |
LIQUIDITY |
5.2% |
5.7% |
4.5% |
4.3% |
SHARE RATIO |
0.27 |
0.20 |
0.21 |
0.26 |
CORRELATION OLD & NEW |
-0.2 |
+0.2 |
+0.2 |
-0.2 |
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