CHAPTER 9 CASE C-1
CHAPTER 10
A JOB AT EAST COAST YACHTS
2. Both the APR and EAR are infinite. The match is instantaneous, so the number of periods in a year is
infinite.
3. The advantage of the actively managed fund is the possibility of outperforming the market, which the
fund has done on average over the past ten years. The major disadvantage is the likelihood of
4. The returns are the most volatile for the small cap fund because the stocks in this fund are the riskiest.
This does not imply the fund is bad, just that the risk is higher and, therefore, the expected return is
5. The Sharpe ratio for each of the mutual funds and the company stocks are:
Bledsoe S&P 500 Index Fund = (11.04% – 3.2)/18.45% = .4249
Bledsoe Small-Cap Fund = (16.14% – 3.2)/29.18% = .4435
6. This is a very open-ended question. The asset allocation depends on the risk tolerance of the individual.
However, most students will be young, so in this case, the portfolio allocation should be more heavily
weighted toward stocks.
In any case, there should be little, if any, money allocated to the company stock. The principle of