Question

Customers A, B, C and D have their portfolio assets allocated as follows:

A B C D
Money Markets 15% 5% 5% 0%
Treasury Bonds 40% 10% 20% 20%
Speculative Bonds 10% 30% 10% 30%
Blue Chip Equities 15% 15% 20% 10%
Small Cap. Equities 10% 10% 30% 5%
Emerging Markets 10% 20% 10% 30%
REITs 0% 10% 5% 5%"

Which asset allocation is MOST appropriate for a risk- tolerant young customer with a long investment time horizon?
a. Customer A
b. Customer B
c. Customer C
d. Customer D

Answer 1

Answer: c. Customer C

Step-by-step explanation:

With a risk- tolerant young customer with a long investment time horizon it would be best to include more stocks in their portfolio as stock have the opportunity to increase in value over a long period of time especially small cap. equities.

The problem is that stock prices are more volatile meaning that they are riskier. This is fine however as the customer has risk tolerance and can take the risk.