Exhibit 16 -Refer to Exhibit 16

question 53

Multiple Choice

Exhibit 16.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A portfolio manager is trying to establish a strategic asset allocation for two different clients, Bob Bowman and Tom Luck. Bob Bowman has a risk tolerance factor of 22 and Tom Luck has a risk tolerance factor of 6. The characteristics of the three model portfolios under consideration are provided in the table below. $\begin{array}{ccccc}&\text { Asset Mix}&&\text { Expected}\\\text { Portfolio } & \text { Stock } & \text { Bond } & \text { Return } & \text { Variance } \\\hline \text { A } & 0.75 & 0.25 & 0.12 & 0.45 \\\text { B } & 0.4 & 0.6 & 0.08 & 0.16 \\\text { C } & 0.3 & 0.7 & 0.05 & 0.06\end{array}$
-Refer to Exhibit 16.1. The recommended portfolio for Bob Bowman is

• A)Portfolio A because it has expected utility of 9.95
• B)Portfolio A because it has expected utility of 4.5
• C)Portfolio B because it has expected utility of 5.33
• D)Portfolio B because it has expected utility of 7.27
• E)Portfolio C because it has expected utility of 6.75

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Definitions:

Defense Mechanism

Psychological strategies used unconsciously by individuals to protect themselves from anxiety arising from unacceptable thoughts or feelings.

Neo-Freudian Psychologist

A psychologist belonging to a movement that adapted and extended Freud's theories, focusing more on social and cultural factors for personality.

Collective Unconscious

Carl Jung's concept of a part of the unconscious mind that is derived from ancestral memory and experience and is common to all humankind.

Inferiority

Feeling lower in status or quality compared to others, which can impact an individual's self-esteem and motivations.