Joan Summers Has $100,000 to Invest and Is Considering Two

question 121

Essay

Joan Summers has $100,000 to invest and is considering two alternatives. She can buy a risk free asset that will pay 10% or she can invest in a stock that has a 0.4 chance of paying 15%, a 0.3 chance of paying 18%, and a 0.3 chance of providing a 6% return. Joan plans to invest $70,000 in the stock and $30,000 in the risk free asset.
a. Determine the expected percentage return on the stock and the standard deviation.
b. Calculate the weighted average return on the portfolio, given the planned investment strategy outlined above.
c. Determine the standard deviation for the portfolio.
d. Write the equation that represents the budget line in the risk-return tradeoff. What is the slope of the budget line? Interpret this slope.

Understand what motivates salespeople according to research.

Analyze the cost-effectiveness of building a salesforce versus hiring independent agents.

Appreciate ethical considerations in sales, particularly regarding competitive intelligence.

Identify the keys to delivering effective need-satisfaction presentations.

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Definitions:

Line of Credit

A flexible loan arrangement with a bank or lender, allowing the borrower to draw funds as needed up to a certain limit.

Simple Interest

Interest assessed only on the original investment, without consideration for compounding.

Annual Rate

The amount of interest, return, or other financial change represented annually, often as a percentage.

Treasury Bill

A short-term government security issued at a discount from the face value and maturing at full face value, offering investors a secure, short-term investment option.