Eh Di Uhaw, Inc. is a company interested in investing money in stocks of companies producing drinks. The management of the company speculates on investing Php 2,000,000 in four available shares. To prevent a high risk index there is a necessity of investing some amount of money in government bonds. From a long-term survey of the financial market following annual rates of return and risk indices are projected: San Miguel Corporation Tanduay Distillers, Inc. Emperador Distillers, Inc. Pepsi Cola Products Philippines, Inc. Government bonds Rate of return 12% 9% 15% 7% 6% Risk index 0.07 0.09 0.05 0.03 0.01 At the board meeting, these restrictions have been approved: • No more than Php 200,000 might be invested in Pepsi Cola Products Philippines, Inc. shares. . Government bonds should cover at least 20% of all investments. • Because of diversification of portfolio, none of the alcoholic drinks companies should receive more than Php 800,000. • Risk index of the final portfolio should be 0.05 at most How should the board of directors of Eh Di Uhaw, Inc. distribute the Php 2,000,000 into the four available shares to generate the highest return, while satisfying the constraints laid down in the board meeting?
Eh Di Uhaw, Inc. is a company interested in investing money in stocks of companies producing drinks. The management of the company speculates on investing Php 2,000,000 in four available shares. To prevent a high risk index there is a necessity of investing some amount of money in government bonds. From a long-term survey of the financial market following annual rates of return and risk indices are projected: San Miguel Corporation Tanduay Distillers, Inc. Emperador Distillers, Inc. Pepsi Cola Products Philippines, Inc. Government bonds Rate of return 12% 9% 15% 7% 6% Risk index 0.07 0.09 0.05 0.03 0.01 At the board meeting, these restrictions have been approved: • No more than Php 200,000 might be invested in Pepsi Cola Products Philippines, Inc. shares. . Government bonds should cover at least 20% of all investments. • Because of diversification of portfolio, none of the alcoholic drinks companies should receive more than Php 800,000. • Risk index of the final portfolio should be 0.05 at most How should the board of directors of Eh Di Uhaw, Inc. distribute the Php 2,000,000 into the four available shares to generate the highest return, while satisfying the constraints laid down in the board meeting?
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter11: Risk-adjusted Expected Rates Of Return And The Dividends Valuation Approach
Section: Chapter Questions
Problem 11PC: Whirlpool manufactures and sells home appliances under various brand names. IBM develops and...
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