Reference no: EM133120605

Assignment 1: Portfolio Drift & Re-balance/Asset Allocation

Instructions:

1. Read the scenario carefully and answer the questions at the end fully. 
2. Choose ONE member from your group to submit the completed assignment via email before noon (MTN) on its due date. Your email should include both a completed Excel File + Word Document answering each question in chronological order. If your excel spreadsheet does not have the formula's demonstrating your calculations, zero marks will be allotted. 
3. Keep everything to 2 DECIMAL PLACES

You notice that the receptionist has booked an appointment for you at 11:30 this morning with Michael Yurkovich for an additional deposit to his mutual fund account.  Michael first opened the account on December 31^st, 2013 with a $25,000 deposit from his mom's estate.  Michael is very pleased with the portfolio's performance (according to the notes entered by the receptionist on the appointment booking).  Happy client with great returns - this should be an easy one!!  And good thing too, because you have scheduled a lunch date and don't want to be late!!

You pull Michael's mutual fund file and notice that in January 2 of 2014, he made the following purchases within the newly opened, non-registered mutual fund account:

These would all seem to be good selections, fairly well diversified and in-line with the completed KYC associated with the account indicating that Michael had a "balanced" investor profile.  You notice that while there had been several attempts to have Michael in over the years to review his investments, there had been no updates to the file or trades on the account.  It would appear as though this is the first time Michael has been in since the account was first opened over 4 years ago!

Use the link below to:

1. Look up each fund's performance from Jan 2, 2014 to March 29, 2018 and calculate the dollar balance now in each fund as well as the annually compounded rate of return per fund
2. Under a separate calculation, compute the annually compounded return for the portfolio as a whole
3. Calculate the simple average weighted return per fund on the initial allocation within the portfolio and comment as to why the portfolio return (calculated in #2) is different than the sum of the weighted average returns of the funds that make up the portfolio
4. Calculate the portfolio's original and current average weighted MER and comment as to why the current average weighted MER for the portfolio is greater or lower than the original MER
5. Limiting the asset classes to either fixed income and / or equity, use each fund's Asset Allocation (as at the most recent update) to determine the portfolio's current FI / EQ asset mix

Assume that an updated KYC confirms that the original asset allocation is still appropriate for Michael.

1. Determine which specific BUY & SELL transactions should be done to attain the original portfolio allocation.
2. Assume that Michael has a marginal tax rate of 30% - what tax impact would result from the transactions recommended in #6. Hint: you will need to identify what fund will incur a tax liability, the tax payable on that fund, and calculate the take home amount for any fund that requires a tax calculation.

Fund Analysis Link:

https://www2.morningstar.ca/homepage/h_ca.aspx?culture=en-CA