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linda_us, Master's Degree
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Here is the mini case study that I need help with--it is due

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Here is the mini case study that I need help with--it is due tonight so please help ASAP!
You are discusing your 401K with Dan Ervin, when he mentions that SarahBrown, a representative from Bledsoe Financial Services is visitng East Coast Yachtstoday. You decide that you should meet with Sarah, so Dan sets up an appoinment foryou later in the day.When you sit down with Sarah, she discusses the various investment optionsavailabel in the company’s 401K account. You mention to Sarah that you researched EastCoast Yachts before you accepted your new job. You are confident in management’sability to lead the company. Analysis of the company has led to your belief that thecompany is growing and will achieve a greater market share in the future. You also feelyou should support your employer. Given these considerations, along with the fact thatyou are a conservative investor, you are leaning toward investing 100% of your 401Kaccount in East Coast Yachts.
Assume the risk-free rate is 3.2%. The correlation between the Bledsloe bond fund and the large cap stock fund is .15. Not the that the spreadsheet graphing and 'solver' functions may assist you in answering the following questions.
1)Considering the effects of diversification, how should Sarah respond to thesuggestion that you invest 100% of your 401K account in East Coast Yachts?
2)After hearing Sarah’s response to investing your 401K acccount entirely in EastCoast Yachts stock, she has convinced you that this may not be the bestalternative. Since you are a conservative investor, you tell Sarah that a 100%investment in the bond fund may be the best alternative, Is it?
3)Using the returns for the Bledsoe Large-Cap Stock Fund and the Bledsoe BondFund, graph the opportunity set if feasible portfolios.
4)After examing the opportunity set, you notice that can invest in portfolio consisting of the bond fund and the large-cap stock fund that will have exactly thesame standard deviation as the bond fund. This portfolio will also have a greaterexpected return. What are the portfolio weights and expected return of this portfolio?
5)Examing the opportunity set, notice there is a portfolio that has the lowest standardeviation. This is the minimum variance portfolio. What are the portfolio weights,expected return, and standard deviation of this portfolio? Why is the minimum variance portfolio important?
6)A measure of risk-adjusted performance that is often used is the Sharpe ratio. The Sharpe ratio is calculated as the risk premium of an asset divided by its standardeviation. The portfolio with the highest possible Sharpe ratio on the opportunity set is called the Sharpe optimal portfolio. What are portfolio weights, expected return, and standard deviation of the Sharpe optimal portfolio? How does the Sharpe ratio of this portfolio compare to the Sharpe ratios of the bond fund and the large cap stock fund? Do you see a connection between the Sharpe optimal portfolio and the CAPM? What is the connection?
Submitted: 1 year ago.
Category: Business and Finance Homework
Expert:  F. Naz replied 1 year ago.

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