A Winner of the Florida Lotto
Post on 11-Sep-2014
Questions A winner of the Florida Lotto has decided to invest $500,000 per year. Two possible considerations are an international stock with an estimated return of 12% and a mutual fund with an estimated return of 6%. The estimate risk index for the international fund is 9 while the mutual fund risk index is 4. The total risk of the portfolio is found by multiplying the risk of each account by the dollar invested in that option. The investor would like to maximize the return on the investment, but the average risk index of the portfolio should not be higher than 6 based on the estimated retirement date. How much should be invested in each option? What is the average risk for this investment? What is the estimated return for the investment?
Answers Already Tried: 9x * 500,000