Raj is creating a portfolio of passive and active investments. His asset allocation is moderate growth...

 

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Raj is creating a portfolio of passive and active investments. His asset allocation is moderate growth with 70% invested in a global equity index fund. He has also invested 20% in an investment grade ETF that follows the Bloomberg Barclay's Aggregate bond index, Raj plan to use 10% of the allocation in an active fund that has allocation to high yield bonds (since the AGG is only investment grade) and has narrowed his search to the following two active bond funds. Fund A High Mid Low Fund B High Mid Low Ltd 30 20 10 Ltd 10 Mod 20 10 Mod 10 20 Ext 10 Ext 10 20 30 Raj expects the yield curve to steepen with a gentle slope. He expects the short term yields will decrease (as central banks try to stimulate the economy) by 1% and the long term yields to increase by 1.5% a) (2.4 marks) Explain how will fund A perform if Raj's forecast came true. b) (2.4 marks) Explain how will fund B perform if Raj's forecast came true. Raj is creating a portfolio of passive and active investments. His asset allocation is moderate growth with 70% invested in a global equity index fund. He has also invested 20% in an investment grade ETF that follows the Bloomberg Barclay's Aggregate bond index, Raj plan to use 10% of the allocation in an active fund that has allocation to high yield bonds (since the AGG is only investment grade) and has narrowed his search to the following two active bond funds. Fund A High Mid Low Fund B High Mid Low Ltd 30 20 10 Ltd 10 Mod 20 10 Mod 10 20 Ext 10 Ext 10 20 30 Raj expects the yield curve to steepen with a gentle slope. He expects the short term yields will decrease (as central banks try to stimulate the economy) by 1% and the long term yields to increase by 1.5% a) (2.4 marks) Explain how will fund A perform if Raj's forecast came true. b) (2.4 marks) Explain how will fund B perform if Raj's forecast came true.