Kim and Darren Jones are both 55 years old and want to retire within the next 12 - 18 months. They currently have the following portfolio: Asset Class % Small cap growth - 35 Large cap value - 30 High yield bonds - 30 T-bills - 0 Corporate bonds - 5 Total - 100 What can be said about the current allocations? A) Too aggressive. B) Properly diversified. C) Not aggressive enough. -------------------------------------------------------------------------------- Which sector should be increased? A) Small cap growth stocks. B) Corporate bonds. C) Large cap value stocks. -------------------------------------------------------------------------------- Two years have passed and the Jones are in retirement. They now realize the asset allocation problems with their portfolio. They enlist the aid of Snipes & Son, an investment advisory firm. Snipes proposes the following four portfolios: Asset Class --------- A ---- B ------ C ------ D Small Cap Growth --5------0-------15-----5 Large Cap Value----5-------0-------25----10 High Yield Bonds----5-------0-------20----10 T-bills-----------------35------0-------10----5 Corporate Bonds—50------100----30----70 Based solely on the information provided, which portfolio would serve the Jones best? A) Portfolio A. B) Portfolio D. C) Portfolio C. -------------------------------------------------------------------------------- Which of the portfolios would yield the lowest expected return? A) Portfolio D. B) Portfolio A. C) Portfolio B
A B B C
ABBC
ABBB? Won’t the high conc. of treasury bills in portfolio A lower the (average) expected return ?
‚‚a‚a‚
A B B B
1A 2B 3C - Rule of thumb is 100-Age in equities - portfolio D is too concentrated in corp bonds. Portfolio C is a bit higher risk than I’d like though, but I’m sure CFAI would say “diversification solves all!” 4C - though toss up with portfolio A. It depends on what your expectations are!
1A 2B 3A (?) 4B
A B B B Have seen this before. Crap questions.
A B D B
A B B C
ABCB
Dwight Wrote: ------------------------------------------------------- > A > B > D > B #3 should be “B”. There is no “D” answer choice.
A, B, B, C
ABBA
A B C B
ABBA
I’m going: A, B, C, B
mwvt9 Wrote: ------------------------------------------------------- > A > B > B > B > > Have seen this before. Crap questions. you got it right…both …the answers and the fact that this is a crap question… I didn’t actually agree with their explanations…but looks like most of you were on the right track…so maybe it’s just me… 4 weeks left…and things are not looking well…sigh
just wanna know… did you all consider the high yield bonds equivalent to equity??