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CHAPTER 12
A JOB AT S&S AIR
2. Both the APR and EAR are infinite. The match is instantaneous, so the number of periods in a year is
3. The advantage of the actively managed fund is the possibility of outperforming the market, which
4. The returns are the most volatile for the small cap fund because the stocks in this fund are the
5. Since we are given the average return for each fund over the past 10 years, we should use the
The Sharpe ratio for each of the mutual funds and the company stocks is:
Bledsoe S&P 500 Index Fund = (6.88% – .71%)/10.75% = .5743
CHAPTER 12 C-2
6. This is a very open-ended question. The asset allocation depends on the risk tolerance of the
In any case, there should be little, if any, money allocated to the company stock. The principle of
diversification indicates that an individual should hold a diversified portfolio. Investing heavily in
Age is a determinant in the decision. Older individuals should be less heavily weighted toward
