• 100% Satisfaction Guarantee

SteveS, MBA
Category: Homework
Satisfied Customers: 453
Experience:  MBA from Top 5 US Business School, Tutoring Experience for Over Two Years
18851589
SteveS is online now

# Percival Hygiene has \$10 million invested in long-term corporate

### Resolved Question:

Percival Hygiene has \$10 million invested in long-term corporate bonds. This bond
portfolio’s expected annual rate of return is 9 percent, and the annual standard deviation
is 10 percent.
Amanda Reckonwith, Percival’s financial adviser, recommends that Percival consider
investing in an index fund which closely tracks the Standard and Poor’s 500 index.
The index has an expected return of 14 percent, and its standard deviation is 16 percent.
a. Suppose Percival puts all his money in a combination of the index fund and Treasury
bills. Can he thereby improve his expected rate of return without changing the
risk of his portfolio? The Treasury bill yield is 6 percent.
b. Could Percival do even better by investing equal amounts in the corporate bond
portfolio and the index fund? The correlation between the bond portfolio and the index
fund is .1.
Submitted: 6 years ago.
Category: Homework
Expert:  SteveS replied 6 years ago.
You can view this answer by clicking here to Register or Login and paying \$3.
SteveS, MBA
Category: Homework
Satisfied Customers: 453
Experience: MBA from Top 5 US Business School, Tutoring Experience for Over Two Years
Customer: replied 6 years ago.

How did you find

 a. Portfolio of index and treasury % index 62.5% % treasury 37.5%

and for b

 % bond 48.1% % index 51.9%
Expert:  SteveS replied 6 years ago.

It's an iterative process, meaning you manually need to put in different mixes until you get what you want. This optimization process can be facilitated by using the "Solver" function in Excel, where you setup the problem in Excel and ask Excel to manually put in numbers until the goal is met. The goal in this case is to have the portfolio standard deviation = 10%.

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

### What Customers are Saying:

• Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
< Previous | Next >
• Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
• This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
• Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
• I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin Kernersville, NC
• Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther Woodstock, NY
• Thank you so much for taking your time and knowledge to support my concerns. Not only did you answer my questions, you even took it a step further with replying with more pertinent information I needed to know. Robin Elkton, Maryland
• He answered my question promptly and gave me accurate, detailed information. If all of your experts are half as good, you have a great thing going here. Diane Dallas, TX

• ### LogicPro

#### Satisfied Customers:

4925
Expert in Java C++ C C# VB Javascript Design SQL HTML
< Last | Next >

### LogicPro

#### Satisfied Customers:

4925
Expert in Java C++ C C# VB Javascript Design SQL HTML

### Manal Elkhoshkhany

#### Satisfied Customers:

4538
More than 5000 online tutoring sessions.

### Linda_us

#### Satisfied Customers:

3138
Post Graduate Diploma in Management (MBA)

### Chris M.

#### Satisfied Customers:

2602
Master's Degree, strong math and writing skills, experience in one-on-one tutoring (college English)

### F. Naz

#### Satisfied Customers:

2126
Experience with chartered accountancy

### Bizhelp

#### Satisfied Customers:

1887
Bachelors Degree and CPA with Accounting work experience