Farr, Miller & Washington (FMW) is an investment company located in Washington, DC. FMW primarily buys individual
Question:
Farr, Miller & Washington (FMW) is an investment company located in Washington, DC. FMW primarily buys individual securities to create a portfolio. They do have a “Wealth Builder” portfolio that buys model ETFs. Their investment management fees range from 1% to 0.75%, with a $5,000 minimum annual fee. This creates a de-facto minimum account size of $500,000 if you’d like to keep your fees at 1%. FMW has been preparing a proposal in regard to portfolio composition for one of its clients. Given that the coefficient of risk aversion of the client is 2, the expected return on an optimal portfolio of risky assets is 11.8%, the expected risk-free rate 4%, and the standard deviation of an optimal risky portfolio is 25%, what proportion of funds should be allocated to the risky asset?
Business Law The Ethical Global and E-Commerce Environment
ISBN: 978-0071317658
15th edition
Authors: Jane Mallor, James Barnes, Thomas Bowers, Arlen Langvardt