An investor wants to invest $300,000 in a portfolio of three mutual funds. The annual fund returns are normally distributed with a mean of 2% and standard deviation of 0.3% for the short-term investment fund, a mean of 5% and standard deviation of 3% for the intermediate - term fund, and a mean of 6.2% and standard deviation of 6% for the long -term fund. An initial plan for the investment allocation is 45% in the short-term fund, 35% in the intermediate - term fund, and 20% in the long-term fund. a. Use Analysis ToolPak, with a seed of 1, to develop a Monte Carlo simulation with 1000 trials to estimate the mean ending balance after the first year. Note: Round the final answer to two decimal places. Mean ending balance after the first year b. If the allocation is changed to 30% short-term, 55% intermediate- term, and 15% long-term, estimate the ending balance after the first year. Note: Round the final answer to two decimal places. Mean ending balance after the first year c. Compare the two investment strategies in parts a and b and choose the most appropriate answer from the following choices. On average, the investment strategy in part a is more risky and yields a lower return. On average, the investment strategy in part a is less risky and yields a higher return. On average, the investment strategy in part a is less risky but yields a lower return. On average, the investment strategy in part a is more risky but yields a higher return. An investor wants to invest $300,000 in a portfolio of three mutual funds. The annual fund returns are normally distributed with a mean of 2% and standard deviation of 0.3% for the short-term investment fund, a mean of 5% and standard deviation of 3% for the intermediate-term fund, and a mean of 6.2% and standard deviation of 6% for the long-term fund. An initial plan for the investment allocation is 45% in the short-term fund, 35% in the intermediate-term fund, and 20% in the long-term fund. a. Use Analysis ToolPak, with a seed of 1, to develop a Monte Carlo simulation with 1000 trials to estimate the mean ending balance after the first year. Note: Round the final answer to two decimal places. Mean ending balance after the first year b. If the allocation is changed to 30% short-term, 55% intermediate-term, and 15% long-term, estimate the ending balance after the first year. Note: Round the final answer to two decimal places. Mean ending balance after the first year c. Compare the two investment strategies in parts a and b and choose the most appropriate answer from the following choices. On average, the investment strategy in part a is more risky and yields a lower return. On average, the investment strategy in part a is less risky and yields a higher return. On average, the investment strategy in part a is less risky but yields a lower return. O On average, the investment strategy in part a is more risky but yields a higher return.

An investor wants to invest $300,000 in a portfolio of three mutual funds. The annual fund returns are normally distributed with a mean of 2% and standard deviation of 0.3% for the short-term investment fund, a mean of 5% and standard deviation of 3% for the intermediate - term fund, and a mean of 6.2% and standard deviation of 6% for the long -term fund. An initial plan for the investment allocation is 45% in the short-term fund, 35% in the intermediate - term fund, and 20% in the long-term fund. a. Use Analysis ToolPak, with a seed of 1, to develop a Monte Carlo simulation with 1000 trials to estimate the mean ending balance after the first year. Note: Round the final answer to two decimal places. Mean ending balance after the first year b. If the allocation is changed to 30% short-term, 55% intermediate- term, and 15% long-term, estimate the ending balance after the first year. Note: Round the final answer to two decimal places. Mean ending balance after the first year c. Compare the two investment strategies in parts a and b and choose the most appropriate answer from the following choices. On average, the investment strategy in part a is more risky and yields a lower return. On average, the investment strategy in part a is less risky and yields a higher return. On average, the investment strategy in part a is less risky but yields a lower return. On average, the investment strategy in part a is more risky but yields a higher return. An investor wants to invest $300,000 in a portfolio of three mutual funds. The annual fund returns are normally distributed with a mean of 2% and standard deviation of 0.3% for the short-term investment fund, a mean of 5% and standard deviation of 3% for the intermediate-term fund, and a mean of 6.2% and standard deviation of 6% for the long-term fund. An initial plan for the investment allocation is 45% in the short-term fund, 35% in the intermediate-term fund, and 20% in the long-term fund. a. Use Analysis ToolPak, with a seed of 1, to develop a Monte Carlo simulation with 1000 trials to estimate the mean ending balance after the first year. Note: Round the final answer to two decimal places. Mean ending balance after the first year b. If the allocation is changed to 30% short-term, 55% intermediate-term, and 15% long-term, estimate the ending balance after the first year. Note: Round the final answer to two decimal places. Mean ending balance after the first year c. Compare the two investment strategies in parts a and b and choose the most appropriate answer from the following choices. On average, the investment strategy in part a is more risky and yields a lower return. On average, the investment strategy in part a is less risky and yields a higher return. On average, the investment strategy in part a is less risky but yields a lower return. O On average, the investment strategy in part a is more risky but yields a higher return.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 10P

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