QSO 520 Module Six Homework Question 1.

. (P6-35) Theo Harris earns $55,000 a year and has $9,000 to invest in a portfolio. His investment alternatives and their

expected returns are shown in the table below.

Investment

A

B

C

D

E

F Description

IRA (retirement)

Employer’s retirement plan

Deferred income (retirement)

Unity mutual fund

Liberty mutual fund

Money market Expected Return

3.5%

4.5%

8.0%

7.0%

7.5%

5.5% Theo’s investment goals are as follows and can be ranked according to the weights shown in parenthesis.

Question 1: Which investments should be included in Theo’s portfolio

Question 2: How much should he invest in each?

Goal 1: (25) Invest all funds available.

Goal 2: (20) Maximize the total annual return in dollars, with a target of $1,000.

Goal 3: (15) Invest at least 3% of salary in employer’s retirement plan.

Goal 4: (15) Invest at least 10% of the total investment in the money market.

Goal 5: (10) Invest at most 25% of the total investment in retirement plans.

Goal 6: (10) Invest at least 50% of the total investment in non-retirement plans.

Goal 7: (5) Invest at most 50% of the total investment in mutual funds.

Question 3: Which investments should be included in Theo’s portfolio?