A retiree, James Timor has an asset base of of €1,900,000.

Taking into account annual inflation of 3% taxes of 15

objectives his constraints and his annual spending needs of €90,000 his financial advisor recommended an asset all
a standard deviation of 8%. The advisor base this on a following calculation. During the next year tomorrow's return
advisor. If it's portfolio returns are normally distributed and independent what is the probability of a loss of 6.81%
three years in a row of returns of less than 9.82%?

Principal € 1,900,000.00
Return rate 0.0982 186,580
Management Expenses 0.005 -9,500
Inflation 0.03 -57,000
Tax rate 0.15 -27,987
Annual Spending 92,093
nual inflation of 3% taxes of 15% management fees are 50 basis points his
sor recommended an asset allocation with an expected return of 9.82% and
he next year tomorrow's return is -6.18% he has scheduled meetings with his
e probability of a loss of 6.81% or more in one year what is the probability of
s of less than 9.82%?
 Timor is unnerved a little by losing over €100,000 last year and his portfolio that had begun the last year at €1,900,
his allocations to stocks and increase his allocations to government securities. What is the effect of the sequence of
his risk tolerance has not changed what advice would have helped him meet his objectives. What difficult d
had begun the last year at €1,900,000. He is now more risk averse and wants to decrease
at is the effect of the sequence of events on Timbers ability to spend €90,000 annually? If
eet his objectives. What difficult difficulty does his change in risk tolerance create?
An investor holds in aggressive growth mutual fund and was forced to sell it at a time when the fund had lost a cons
of money. She is upset at being forced out of the fund and claims that this endangers her ability to meet critical r
objectives. Is the investor correct in her appraisal of the consequence of being forced out of the fund
me when the fund had lost a considerable amount
ngers her ability to meet critical return and risk
ce of being forced out of the fund?
A 40-year-old employee has never before belong to a defined contribution retirement plan upon seeing the investm
available in the plan she determines that she needs to tell her portfolio towards aggressive growth funds to make
time. Discuss the merits of this catch-up strategy.
ment plan upon seeing the investment alternatives
aggressive growth funds to make up for the last
strategy.
If an asset class has 0.25 correlation with the market portfolio and the market portfolio has a sharpe ratio of 0.2 wha
tfolio has a sharpe ratio of 0.2 what would you expect as a sharpe ratio of the asset class?