Portfolio Managment

In: Business and Management

Submitted By jpschedin
Words 2210
Pages 9
Bus. 463 Project Report, Extended
Geo Mean, Jensen-Alpha Measure
April 1st, 2013

Table of Contents Client Description……………………………………………………………………………………3
Discussion of Models……………………………………………………………………………...4 Markowitz Model………………………………………………………………………..4-5 Single-Index Model………………………………………………………………………..5 Geometric Mean…………………………………………………………………………….6
Recommendations…………………………………………………………………………………6-7
Analysis……………………………………………………………………………………………………7
Appendix A………………………………………………………………………………………………8
References……………………………………………………………………………………………….9

Client Description Joe Schedin is 45-years-old, who has spent the last 18 years working for Costco as a meat cutter. He will be switching jobs as he wants to do something new and more exciting so he will be able to contribute $110,000 to add to the current portfolio. He wants to be able to retire in 20 years, by age 65, and would like to have at least a million dollars for retirement as well as a surplus of greater than or at least $40,000 in order to pay for his new step-son’s college fund. He would like to be able to only use about half of the retirement to live off of, and keep the rest either invested in his portfolio, or set up college funds, IRA’s, etc. to help his family with his grandchildren and give them a chance for a higher education. With this information I was able to calculate a yearly rate of return needed to generate at least $1.1 million dollars with the initial investment of $152,212, compounded over 20 years. The minimum yearly rate of return needed is 10.4 percent. This number assumes the returns on the stocks will not vary and stay constant over time. When Joe and I were going over the numbers, I advised we add five percent to compensate for economic downturns, family emergencies, or other such things that may arise as life continues. He agreed and so, I set his minimum yearly…...

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