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1. Problem 2-39 Innis Investments manages funds for a number of companies and wealthy clients. The investment strategy is tailored to each client's needs. For a new client, Innis has been authorized to invest up to $1.2 million in two investment funds: a stock fund and a money market fund. Each unit of the stock fund costs $50 and provides an annual rate of return of 10%; each unit of the money market fund costs $100 and provides an annual rate of return of 4%. The client wants to minimize risk subject to the requirement that the annual income from the investment be at least $60,000. According to Innis’s risk measurement system, each unit invested in the stock fund has a risk index of 8, and each unit invested in the money market fund has a risk index of 3; the higher risk index associated with the stock fund simply indicates that it is the riskier investment. Innis’s client also specifies that at least $300,000 be invested in the money market fund. a. Determine how many units of each fund Innis should purchase for the client to minimize the total risk index for the portfolio. Let S = number of units purchased in the stock fund M = number of units purchased in the money market fund b. Optimal Solution: S = , M = , value = . c. How much annual income will this investment strategy generate? Annual income = $ d. Suppose the client desires to maximize annual return. How should the funds be invested? Invest everything in the ? Money Market Fund ? Stock Fund
The New Lombard Street, Merhling (2011) quotes Fischer Black(1970) in saying: Thus a long term corporate bond could actually be sold to three separate persons. How does the separation of risk work? What financial instruments are needed? Give an expla..
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You invest in a fast food restaurant on Rt. 13 in Dover, Delaware (Hey, it seemed like a good idea at the time). You were required to invest $300,000. One year passes. You decide to sell your business. During the year you were paid $25,000 as your % ..
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State the appropriate monetary policy which the Bank of Canada should be operating, given the above situation.
How do global advertising campaigns benefit the company - what are the global advertising strategies of this company? How effective are they?
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