Portfolio Risk Management Techniques and Ethical Considerations

Portfolio Risk Management Techniques and Ethical Considerations

Part I
Deliverable Length: 400-600 words
Read the article for this discussion.

To answer this question, locate the following article (see below) by visiting ProQuest/Source Type: Newspapers/Publication title: Wall Street Journal (online)
Target-Date Funds: What Retirement Savers Should Know Anonymous. Wall Street Journal (Online); New York, N.Y. [New York, N.Y] 22 Apr 2014: n/a.
In your own words, please write a response to the article.

Part II
Deliverable Length: 300-500 words
Monica Dubois, an ABC investment advisor, has a new client, Mr. Jack Klein. Mr. Klein is a conservative investor who is interested in a required rate of return of 10% on his stock investments while assuming lower market risk. You are asked to help Monica make a suitable portfolio recommendation backed by risk-return calculations. The 3 possible stock choices for Mr. Klein and their respective betas are as follows:
Stock Expected Return Beta
ABC 10% 0.75
XYZ 11% 1.0
WHY 12% 1.25
Part I
Determine the expected returns and beta for a portfolio consisting of one third of Mr. Klein’s funds in each stock.
Part II
Assume the following:
* Each ABC stock pays current dividends of $1.50 annually with 6% expected annual increases. The current market stock price for ABC is $30 per share.
* Each XYZ stock pays current dividends of $1.75 annually with 6% expected annual increases. The current market stock price for XYZ is $27 per share.
* Each WHY stock pays current dividends of $2.25 annually with 7% expected annual increases. Current market stock price for WHY is $35 per share.
Complete the following for this assignment:
* Using the constant dividend growth model, determine whether ABC and WHY are over- or undervalued.
* For what types of companies is the constant growth model an appropriate analysis tool?
* What are the limitations of the constant growth model?