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Question;4. You are in the 25 percent income tax bracket. What are the taxes owed or saved if youa) Contribute $2,000 to a 401(k) planb) Contribute $2,000 to a Roth IRAc) Withdraw $2,000 from a traditional IRAd) Withdraw $2,000 from a Keogh account7. You are 60 years old. Currently, you have $10,000 invested in an IRA and have just received a lump-sum distribution of $50,000 from a pension plan, which you roll over into an IRA. You continue to make $2,000 annual payments to the regular IRA and expect to earn 9 % on these funds until you start withdrawing the money at age 70 (i.e., after ten years). The IRA rollover will earn 9% for the same duration.a) How much will you have when you start to make withdrawals at age 70?b) If your funds continue to earn 9% annually and you withdraw $17,000 annually, how long will it take to exhaust your funds?c) If your funds continue to earn 9% annually and your life expectancy is 18 years, what is the maximum you may withdraw each year?Chapter #52. A portfolio consists of assets with the following expected returns:Expected Return Weight in PortfolioReal estate 16% 20%Low-quality bonds 15 10 AT&T stock 12 30Savings account 5 40a) What is the expected return on the portfolio?b) What will be the expected return if the individual reduces the holdings of the AT&T stock to 15% and puts the funds into real estate investments?3. You are given the following information concerning two stocks:A BExpected return 10% 14%Standard deviation of the expected return 3.0 5.0Correlation coefficient of the returns -0.1a) What is the expected return on a portfolio consisting of 40% in stock A and 60% in stock B?b) What is the standard deviation of this portfolio?c)Discuss the risk and return associated with investing (a) all your funds in stock A, (b) all your funds in stock B, and (c) 40% in A and 60% in B. (This answer must use the numerical information in your answers derived above.)5. What is the beta of a portfolio consisting of one share of each of the following stocks, given their respective prices and beta coefficients?Stock Price BetaA $10 1.4B 24 0.8C 41 1.3D 19 1.8How would the portfolio beta differ if (a) the investor purchased 200 shares of stocks B and C for every 100 shares of A and D and (b) equal dollar amounts were invested in each stock?6. What is the return on a stock according to the security market line if the risk-free rate is 6%, the return on the market is 10%, and the stock?s beta is 1.5? If the beta had been 2.0, what would be the return? Is this higher return consistent with the portfolio theory explained in the chapter? Why?

Paper#50233 | Written in 18-Jul-2015

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