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:

Congress

The national legislative body of a country, particularly in the United States, it's made up of two houses: the Senate and the House of Representatives.

Two-Thirds Vote

A voting requirement used in various legislative bodies, where two-thirds of the voting members must agree on a proposal for it to pass.

Seventeenth Amendment

An amendment to the U.S. Constitution ratified in 1913 that established the direct election of U.S. Senators by popular vote, replacing their selection by state legislatures.

Senators

Members of the senate, which is one of the two chambers in the bicameral legislature of many countries, including the United States.