Finance and Accounting

Finance and Accounting

The Financial Advisor has offered Faisal in question 1 above the following alternative asset allocations to be considered for his portfolio

Allocation
A    B    C    D
Stocks    20%    40%    60%    80%
Bonds    75%    55%    35%    15%
Cash    5%    5%    5%    5%
Total    100%    100%    100%    100%
Expected Annual
Return    6.7%    7.5%    8.2%    9.1%
Standard Deviation    9.0%    11.5%    15.3%    19.0%
Future Potential
Asset Growth    Very low    Low    Moderate    High
Income Growth    Very low    Low    Moderate    High
Current Income    High    High    Low    Very low
Stability    Very High    High    Moderate    Low

Explain giving reasons what would you believe would be the optimal allocation for Faisal keeping in mind his risk and return objectives.

If Faisal were to take up a new job after 6 months and assuming that he would continue working for another 5 years, would you allocation change? Explain why or why not? In case you believe there should be a change, which allocation would not be preferable?

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