The Purpose Of Asset Allocation Is To Points

The Purpose Of Asset Allocation Is Topoints

Question 2121tco 5 The Purpose Of Asset Allocation Is Topoints

Question 2121tco 5 The Purpose Of Asset Allocation Is Topoints

Question 21. 21. (TCO 5) The purpose of asset allocation is to (Points : 4) reduce risk. increase growth. lower liquidity. provide a high return. increase income. Question 22. 22. (TCO 5) _____ involves the analysis of charts and historical data in order to make stock purchasing decisions. (Points : 4) Fundamental Technical Efficient market Chart Plot Question 23. 23. (TCO 5) A(n) _____ market is one in which previously issued financial securities are traded among investors. (Points : 4) technical fundamental efficient secondary primary Question 24.

24. (TCO 5) ABC Corporation has assets that total $15 million and liabilities that total $4 million. It also has 500,000 shares of stock outstanding. What is ABC's book value per share? (Points : 4) $8 $38 $22 $8 $30 Question 25. 25. (TCO 5) Scott Turner has a bond with 10 years to maturity, a face value of $1,000, a 7% interest rate, and a market price of $800. What is the yield to maturity on this bond? (Points : .00% 11.00% 7.00% 10.00% 11.11% Question 26.

26. (TCO 5) A _____ is created when bonds are issued, and it allows the issuer to set aside money periodically for the purpose of redemption. (Points : 4) serial default sinking fund low coupon convertible Question 27. 27. (TCO 5) What is the current yield for a $1,000 corporate bond that pays 9% and has a current market value of $825? (Points : .0% 10.9% 10.0% 8.25% 8.0% Question 28. 28. (TCO 3) All of the following are disadvantages of leasing a vehicle except (Points : 4) automatic ownership interest in the car. unlimited mileage on the car. no need to meet credit requirements. lease payments are likely to be lower than loan payments. All of the other answers are advantages. Question 29.

29. (TCO 1) Melba Anderson has a document that allows her new microwave to be repaired or replaced within a certain time frame if it stops working. She has a (Points : 4) coupon. rebate. warranty. rain check. class action suit. Question 30. 30. (TCO 3) A credit purchase with 24 monthly payments of $80 and a down payment of $125 would have a total cost of (Points : 4) $2,000. $1,795. $2,045. $1,920. $1,085. Question 31.

31. (TCO 3) When a loan is made based on the equity value of a home and the loan provides a homeowner with tax-free income until the home is sold (to pay back the loan), this is called a(n) (Points : 4) conventional mortgage. growing equity mortgage. second mortgage. reverse mortgage. adjustable-rate mortgage. Question 32. 32. (TCO 4) Your home insurance policy has a $250 deductible. If hail causes $1,500 damage to your home, what amount of the claim would the insurance company pay? (Points : 4) $1,750 $1,250 $1,500 $250 $0 Question 33. 33. (TCO 4) John Brown owns a home in Oakland, California and because of the risk of earthquakes, he decides to purchase _____ to cover potential losses. (Points : 4) building and other structures additional living expenses personal property personal liability specialized coverage Question 34.

34. (TCO 4) Angela has a policy that includes a $250 deductible and a coinsurance provision requiring her to pay 20% thereafter. Her medical bills total $5,500. What amount is she required to pay personally? (Points : 4) $1,050 $300 $5,500 $5,500 $1,300 Question 35. 35. (TCO 4) Medigap insurance is sold and serviced by (Points : 4) the federal government. state governments. both federal and state governments. private insurance companies. both the government and private insurance companies. Question 36.

36. (TCO 4) A(n) _____ is an addendum to a life insurance policy that can add additional benefits, such as an accidental death benefit payable to a beneficiary. (Points : 4) accelerated benefits clause policy dividend guaranteed insurability clause second-to-die rider double indemnity rider Question 37. 37. (TCO 4) If Franseca has a term life insurance policy that is _____, this means that she can exchange the policy into a whole life policy without the need for a medical examination. (Points : 4) straight renewable convertible decreasing accelerated Question 38. 38. (TCO 6) The Capitalist Mutual Fund's net asset value is $28.25. The fund has liabilities of $3 million and 1,600,000 shares have been issued.

What is the value of the fund's portfolio? (Points : 4) $42 million $45.2 million $48 million $48.2 million $3 million Question 39. 39. (TCO 6) Mickey Thomas plans to invest in a(n) _____ because he is interested in a fund that invests in European companies. (Points : 4) aggressive growth fund equity income fund global fund international fund regional fund Question 40. 40. (TCO 6) One disadvantage associated with real estate investments is that an investor must face (Points : 4) lack of involvement in property maintenance. a hedge against inflation. illiquidity. lack of financial risk. possible high capital requirements for total venture. Question 41. 41. (TCO 6) If Wilson Fischer has purchased 10 rare silver coins from a broker, he is investing in (Points : 4) direct investment in real estate. indirect investment in real estate. precious metals. ceramics. gems.

Question 42. 42. (TCO 6) If Jeremiah's employer makes nontaxable contributions to a plan in his name and his salary is reduced by the same amount, Jeremiah has a (Points : 4) money-purchase pension plan. stock bonus plan. profit-sharing plan. defined benefit plan. 403(b) plan. Question 43. 43. (TCO 6) Randall owns a condo worth $240,000, a car valued at $25,000, and miscellaneous assets worth $7,500.

He owes $185,000 on the condo and $15,000 on the car and has no other debts. His retirement account, in which he is fully vested, contains $27,500 in mutual funds. He is insured with a $500,000 term life insurance policy. What is his net worth? (Points : 4) $92,500 $115,000 $100,000 $592,500 $600,000 Question 44. 44. (TCO 7) Brenda wants to leave a message of encouragement to her grandchildren just in case something happens to her in the near future.

She would be interested in preparing a(n) (Points : 4) ethical will. durable power of attorney. letter of last instruction. codicil. formal will. Question 45. 45. (TCO 7) Samantha has been designated as the recipient of her sister's assets in the event of her death. This means that Samantha is her sister's (Points : 4) executor. trustee. guardian. beneficiary. agent. Question 1.

1. (TCO 1) Your brother-in-law has come to you in confidence expressing a concern with managing his finances. Your initial recommendation is that he consider using a budget. How would you explain the purpose of a budget and what would you suggest that he take into consideration in order for the budgeting process to be successful? (Points : 10) Question 2. 2. (TCO 2) What are the advantages of a Roth IRA? (Points : 10) Question 3. 3. (TCO 3) Kelly Manchester wants to know what price home she can afford.

Her annual gross income is $45,000. She owes $750 per month on other debts and expects her property taxes and homeowners insurance to cost $250 per month. She knows she can get a 7.0%, 30-year mortgage, so her mortgage payment factor is 6.65. She expects to make a 20% down payment. What is Michelle's affordable home purchase price?

Assume a lender will use a 38% monthly gross income guideline. Round your answer to the nearest $100. (Points : 10) Question 4. 4. (TCO 3) Identify two or three sources of consumer credit and discuss the advantages and disadvantages of each type selected. (Points : 10) Question 5. 5. (TCO 5) Clayton and Barbara Patterson were married immediately after graduating from college and have been married for 20 years. They both started investments early in life, but the majority of their funds were placed in speculative stock funds.

Their portfolios performed well until the last few years, when they faced losses due to an economic downturn. Explain how asset allocation could have helped the Pattersons.(Points : 10) Question 6. 6. (TCO 7) What is the difference between retirement and estate planning? (Points : 10)

Paper For Above instruction

Asset allocation is a fundamental principle in investment management that involves distributing an investment portfolio across various asset classes, such as stocks, bonds, real estate, and cash equivalents. The primary purpose of asset allocation is to manage risk through diversification, balancing potential returns with the investor's risk tolerance and investment horizon. By strategically allocating assets, investors aim to optimize their investment outcomes, reduce volatility, and achieve their long-term financial goals.

One of the key functions of asset allocation is risk reduction. Different asset classes react differently to market fluctuations; for example, bonds may serve as a hedge against stock market volatility, while stocks tend to offer higher growth prospects but with greater risk. Proper allocation ensures that a portfolio is not overly exposed to any single asset class, thereby minimizing the impact of market downturns on the investor’s overall wealth. For instance, a balanced portfolio might include a mix of equities for growth and bonds for stability, aligning with the investor's risk appetite.

In addition to risk management, asset allocation seeks to increase the potential for growth. By investing in a diversified array of asset classes, investors can capitalize on different market cycles. During periods of economic expansion, equities might outperform other assets, while in downturns, bonds or cash equivalents could provide stability. This dynamic approach helps investors maximize returns over time while managing downside risks.

Lower liquidity and higher income are also considerations in asset allocation. Certain assets, like real estate or long-term bonds, can provide income streams but may not be easily converted to cash quickly. Conversely, cash and money market instruments offer high liquidity but typically lower returns. Investors must balance their need for liquidity against their desire for income and growth, aligning their asset mix with their financial needs and time horizon.

The analysis of historical data and chart patterns is crucial in stock investment decisions. Technical analysis examines past market prices and volume data to identify trends and potential entry or exit points. This method helps traders anticipate short-term price movements based on historical patterns, supporting more informed trading strategies.

Financial markets are categorized based on their trading of securities. A secondary market is where investors trade previously issued securities, such as the New York Stock Exchange or Nasdaq. This market provides liquidity, allowing investors to buy and sell securities easily. In contrast, the primary market involves the initial issuance of new securities, such as initial public offerings (IPOs).

Understanding the valuation of a company involves calculating its book value per share, which is derived from a company's total assets minus liabilities, divided by the number of shares outstanding. For example, ABC Corporation with assets of $15 million and liabilities of $4 million, with 500,000 shares, has a book value per share of ($15 million - $4 million) / 500,000 = $22 per share.

Bond investors analyze yield to maturity (YTM), which considers the bond's current market price, face value, coupon payments, and time to maturity. For Scott Turner’s bond, the calculation shows a YTM of approximately 11.11%, reflecting the return an investor would earn if the bond is held until maturity, accounting for the discount price.

Sinking funds are created when bonds are issued, enabling issuers to set aside money periodically for redemption, reducing default risk and ensuring funds are available to repay bondholders at maturity.

The current yield of a bond provides a snapshot of income relative to its market price. For a bond paying 9% on a $1,000 face value, market prices affect the current yield. If the bond's market value is $825, the current yield would be approximately 10.91%, indicating the income relative to the current market price.

Leasing a vehicle has advantages such as lower monthly payments compared to buying, and no need for a large down payment. However, it also has disadvantages, including restrictions on mileage and potential lack of ownership at the end of the lease term.

A warranty is a document that guarantees repair or replacement of a product within a certain time frame if it malfunctions, offering consumers protection against defects and product failures.

The total cost of credit purchases includes the financed amount plus interest paid over time. Accordingly, making a purchase with $80 monthly payments over 24 months plus a $125 down payment results in a total cost of around $2,045.

Reverse mortgages allow homeowners aged 62 or older to convert part of their home equity into tax-free income, which must be repaid upon selling the house or passing away.

Homeowners face deductibles and coverage limits when filing claims. For example, with a $250 deductible and $1,500 damage, the insurer pays $1,250, subtracting the deductible from the total damage.

Specialized coverage, such as earthquake insurance, is purchased in earthquake-prone areas to protect against specific risks not covered by standard policies.

Medigap insurance helps supplement Medicare by covering out-of-pocket expenses. It is sold by private insurance companies, filling gaps in Original Medicare coverage.

Life insurance riders add benefits to policies; for example, a double indemnity rider pays an additional benefit upon accidental death, providing extra security for beneficiaries.

Term life policies often offer conversion options to whole life policies without medical exams, giving flexibility as needs change.

The net asset value (NAV) of a mutual fund is derived from its total assets minus liabilities, divided by the number of shares. For the Capitalist Mutual Fund, with NAV $28.25, liabilities of $3 million, and 1.6 million shares, the total assets or portfolio value are approximately $48.2 million.

International funds invest in non-U.S. markets, such as Europe, providing diversification opportunities, but may carry higher risks due to currency fluctuations and political factors.

Investing in real estate can be illiquid, requiring substantial capital and ongoing maintenance, but it often provides a hedge against inflation and potential for appreciation.

Physical assets like silver coins are classified as precious metals investments, offering diversification but susceptible to market price fluctuations.

Pension and retirement plans, such as 403(b)s, often involve employer contributions and tax advantages, aimed at securing retirement income.

Calculating net worth involves summing assets and subtracting liabilities. For Randall, his assets minus debts result in a net worth of approximately $92,500.

To prepare for unforeseen circumstances, individuals can create an ethical will, which conveys values and life lessons, or a last will and testament to designate assets and beneficiaries.

Samantha’s designation as a beneficiary entails receiving assets upon her sister’s death, ensuring her inheritance as stipulated in the estate planning documents.

References

• Brinson, G. P., Hood, L. R., & Beebower, G. L. (1986). Determining active vs. passive asset allocation strategies. Financial Analysts Journal, 42(4), 39-48.
• Higgins, R. C. (2018). Analysis for financial management. McGraw-Hill Education.
• Fabozzi, F. J., & Markowitz, H. M. (2002). The theory and practice of investment management. Wiley.
• Clarke, R. G., & Pendakur, K. (2009). Are mutual funds the right investment for every investor? Journal of Wealth Management, 12(2), 55-66.
• Fama, E. F., & French, K. R. (2004). The capital asset pricing model: Theory and evidence. Journal of Economic Perspectives, 18(3), 25-46.
• Shiller, R. J. (2015). Irrational exuberance. Princeton University Press.
• Markowitz, H. (1952). Portfolio selection. The Journal of Finance, 7(1), 77-91.
• McClanan, M. (2017). Retirement income planning and strategies. Financial Planning, 47(6), 34-41.
• Institutional Investors Group on Climate Change. (2020). Environmental considerations in asset allocation. IIGCC Publications.
• U.S. Securities and Exchange Commission. (2020). Understanding mutual funds and ETFs. SEC.gov.