Exhibit 15 -Refer to Exhibit 15

question 40

Multiple Choice

Exhibit 15.1
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.
                               $\begin{array}{c}\begin{array}{lll}\text{Asset Mix}\end{array}\begin{array}{lll}&&&\end{array}\begin{array}{lll}Expecterd\end{array}\end{array}$
$\begin{array}{cllcc}\text { Portfolio } & \text { Stock } & \text { Aond } & \begin{array}{c} \\\text { Return }\end{array} & \text { Variance } \\\hline \text { A } & 0.75 & 0.25 & 0.12 & 0.45 \\\text { B } & 0.4 & 0.6 & 0.08 & 0.16 \\\text { C } & 0 . & 0.7 & 0.05 & 0.66\end{array}$
-Refer to Exhibit 15.1.The expected utilities of Portfolios A,B and C for Tom Luck are

• A) Portfolio A = 9.95, Portfolio B = 7.27, Portfolio C = 4.73
• B) Portfolio A = 4.5, Portfolio B = 5.33, Portfolio C = 4.0
• C) Portfolio A = 7.95, Portfolio B = 5.33, Portfolio C = 4.73
• D) Portfolio A = 3.5, Portfolio B = 7.27, Portfolio C = 4.73
• E) Portfolio A = 5.33, Portfolio B = 7.27, Portfolio C = 6.75

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Definitions:

Depreciation

An accounting method of allocating the cost of a tangible asset over its useful life to account for declines in value over time.

Plant Assets

Durable physical assets employed in the running of a business, designed for long-term use and not for being sold off.

Accrued Expenses

Expenses that have been incurred but not yet paid or recorded in the company's financial statements.

Accrued Revenues

Revenues that have been earned but not yet received in cash or recorded at the statement date, common in service-related transactions.