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  3. the following tables shows 5 year returns of diffe

The following tables shows 5 year returns of different funds Mutual Fund Annual Return (%) Year 1 Year 2 Year...

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General Management

The following tables shows 5 year returns of different funds

Mutual Fund

Annual Return (%)

Year 1

Year 2

Year 3

Year 4

Year 5

Stocks

12.01

11.22

13.47

45.42

-21.93

Bonds

17.64

4.25

7.51

-1.33

7.36

Aggressive Growth

32.41

18.71

30.09

41.46

-23.26

Aggressive Value

32.36

20.61

12.93

7.06

-5.37

Moderate Growth

33.44

19.40

6.77

58.68

-9.02

Moderate Value

24.56

25.32

-6.70

5.43

17.31

Let’s assume the minimum return every year across all the fundsis M. This means sum of money invested in stock, bonds, aggressivegrowth, aggressive value, moderate growth and moderate value in anyyear will return at least M%.

Keep in mind that the total percentage of money allocated acrossall the funds in any year will be 100%. This means stocks + bonds +…… moderate value = 100% or 1

The objective here is to maximize return in any year. E.g. inyear 1 to maximize return, one can invest all the money in moderategrowth, but this will not work because in year 2, moderate valuereturns higher. Therefore, the objective is to come up with anallocation across all the funds such that the return is maximum inthe 5 year period.

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