Investment decision, Portfolio Management

An investment manager at TD Ameritrade is making a decision about a $10,000,000 investment.  There are four portfolio options available and she is looking at annual return of these portfolios to choose one.   Market has four possible situations: bad, average, good, and excellent.  Each portfolio may have a different estimated rate of return under a known market situation.  For "Bad", "Average", "Good", and "Excellent" market, "Option 1" has return rates of 33%, 28%, 1%, and loss of 15% respectively.  These numbers are 22%, 12%, 17%, and loss of 5% for "Option 2", 8%, 9%, 14%, and 16% for "Option 3", and finally for "Option 4" these rates are loss of 2%, 5%, 12%, and 35% under "Bad", "Average", "Good", and "Excellent" market situations. 

a.    Compare the outcomes for all portfolios under any market situation.  What is the best portfolio under Minimax Regret rule? 

b.    Does the outcome change if the investment decision was made based on the expected value of portfolios?  Why? Probabilities for bad, average, good, and excellent market situations are 35%, 22%, 25%, and 18% respectively.

 

 

Posted Date: 10/1/2012 8:21:17 AM | Location : United States







Related Discussions:- Investment decision, Assignment Help, Ask Question on Investment decision, Get Answer, Expert's Help, Investment decision Discussions

Write discussion on Investment decision
Your posts are moderated
Related Questions
how to value convertible preference shares

If the HPY on a 2 year investment is 11.4% and you invested $8,000 at the start, what would be the ending value?

These are the shares in mainland China-based companies that trade on Chinese stock exchanges like Shanghai Stock Exchange and the Shenzhen Stock Exchange. A-shares are usually only

ABC company issued an Initial Public Offering with 15% preferences shares of total subscription of 250000USD. The cost of capital for the preference shares is 12%. What is the valu

how portfolio risk is covered and how to compute portfolio risk

what is the random walk and the efficient market hypothesis?

Yield to maturity

Problem 1: Excel, a private firm, is in the process of purchasing an equipment representing an investment of about Rs10million. After considering all the offers from the pote

explain phases of portfolio management?

1. What are basic assumptions of CAPM? What are the advantages of adopting CAPM model in the portfolio management?